TIDMBC39
RNS Number : 2691M
Northern Powergrid (Yorkshire) plc
26 April 2018
The following regulated information, disseminated pursuant to
DTR 6.3.5, comprises the Annual Report and Accounts of Northern
Powergrid (Yorkshire) plc for the year ended 31 December 2017.
Pursuant to LR 17.3.1, the document has been submitted to the
National Storage Mechanism and will shortly be available for
inspection at:
www.hemscott.com/nsm.do
The 2017 Annual Report and Accounts are also available on the
website
http://www.northernpowergrid.com/document-library/financial
Enquiries:
Jenny Riley 01977 605155
REGISTERED NUMBER: 04112320 (England and Wales)
STRATEGIC REPORT, REPORT OF THE DIRECTORS AND
FINANCIAL STATEMENTS FOR THE YEARED 31 DECEMBER 2017
FOR
NORTHERN POWERGRID (YORKSHIRE) PLC
NORTHERN POWERGRID (YORKSHIRE) PLC
CONTENTS OF THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2017
Page
Company Information 1
Strategic Report 2
Report of the Directors 15
Report of the Independent
Auditor 19
Statement of Profit or Loss 24
Statement of Profit or Loss
and Other Comprehensive Income 25
Statement of Financial Position 26
Statement of Changes in Equity 27
Statement of Cash Flows 28
Notes to the Financial Statements 29
NORTHERN POWERGRID (YORKSHIRE) PLC
COMPANY INFORMATION
FOR THE YEARED 31 DECEMBER 2017
DIRECTORS: T E Fielden
J M France
T H France
N M Gill
P A Jones
A J Maclennan
A R Marshall
P C Taylor
COMPANY SECRETARY: J C Riley
REGISTERED OFFICE: Lloyds Court
78 Grey Street
Newcastle upon Tyne
NE1 6AF
REGISTERED NUMBER: 04112320 (England and Wales)
AUDITOR: Deloitte LLP
Statutory Auditor
Newcastle upon Tyne
United Kingdom
NORTHERN POWERGRID (YORKSHIRE) PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
The directors present the annual reports and financial
statements for the year ended 31 December 2017 of Northern
Powergrid (Yorkshire) plc (the "Company"), which have been drawn up
and are presented in accordance with the Companies Act 2006.
BUSINESS MODEL
The Company is an authorised distributor under the Electricity
Act 1989 and holds an electricity distribution licence granted by
the Secretary of State. As a distribution network operator ("DNO"),
the Company distributes electricity to approximately 2.3 million
customers connected to its electricity distribution network
throughout the areas of West Yorkshire, East Yorkshire, almost all
of South Yorkshire, together with parts of North Yorkshire,
Derbyshire, Nottinghamshire, Lincolnshire and Lancashire. Some
21,628 gigawatt-hours of electricity were distributed to those
customers during the year.
The Company's distribution network includes over 53,000
kilometres of overhead and underground cables and over 35,000
substations. Electricity is received from National Grid's
transmission system and from generators connected directly to the
network, and then distributed at voltages of up to 132 kilovolts
("kV").
In common with Northern Powergrid Holdings Company and its
subsidiaries (the "Northern Powergrid Group"), the Company operates
a business model and strategy based on six core principles (the
"Core Principles"), which are:
Core Principle Strategic Key Performance Indicators
objective ("KPI")
----------------- ---------------------- ---------------------------------
Financial Strong finances - Operating profit
strength that enable - Maintenance of investment
improvement grade credit ratings
and growth. - Cash flow
--------------- ---------------------- ---------------------------------
Customer Delivering - Broad measure of customer
service exceptional satisfaction
customer - Stakeholder Engagement
service. rank
--------------- ---------------------- ---------------------------------
Operational High-quality, - Customer Minutes Lost
excellence efficient - Customer Interruptions
operators - Network investment
running - High voltage restoration
a smart time
reliable
energy system.
--------------- ---------------------- ---------------------------------
Employee High-performing - Occupational Safety and
commitment people doing Health Administration Rate
rewarding - Preventable Vehicle Accidents
jobs in - Lost time accidents
a safe and - Restricted duty accidents
secure workplace. - Medical treatment accidents
- Operational incidents
- Absence rate
--------------- ---------------------- ---------------------------------
Environmental Leaders - Total Oil/Fluid Lost
respect in environmental - SF6 Gas discharges
respect - Environmental Incidents
and low - Carbon Footprint
carbon technologies.
--------------- ---------------------- ---------------------------------
Regulatory Trustworthy, - Quarterly certification
integrity fair and
balanced,
creating
win-win
outcomes.
--------------- ---------------------- ---------------------------------
The core principles are defined by a number of strategic
objectives. Throughout the report, the strategic focus of each
principle sets out the way in which each objective is to be
achieved through the delivery of key performance indicators.
NORTHERN POWERGRID (YORKSHIRE) PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
REVIEW OF THE YEAR
FINANCIAL STRENGTH
---------------- ----------------------------------------------------
Strategic KPI 2017 2016
objective
---------------- -------------------------- ----------- -----------
Strong finances Operating Profit GBP187.6 GBP199.4
that enable million million
improvement
and growth.
---------------- -------------------------- ----------- -----------
Credit Rating (Standard A A
& Poor's)
---------------- -------------------------- ----------- -----------
Cash Operating GBP174.6 GBP215.7
Flow activities million million
-------- ---------------- ----------- -----------
Investing GBP(157.4) GBP(183.3)
activities million million
---------------- -------- ---------------- ----------- -----------
Strategic focus: To provide the financial resources to support
long-term corporate stability.
Performance during the year: The Company continued to maintain
good control in respect of both its capital and operating costs by
effectively managing the financial risks that could have had an
adverse impact on its business. The ED1 price control has been set
for eight years with provision for a mid-period review if there are
changes to the outputs that the Company is required to deliver. The
ED1 price control provides the Company with some stability in terms
of its income until 31 March 2023.
Revenue: The Company's revenue at GBP413.5 million was GBP1.6
million lower than the prior year due to the profile of allowed
revenues over the ED1 price control period and reduced units
distributed.
Operating profit and position at the year-end: The Company's
operating profit of GBP187.6 million was GBP11.8 million less than
the previous year, primarily reflecting higher depreciation
charges, increased business rates and pension costs. The statement
of financial position on page 26 shows that, as at 31 December
2017, the Company had total equity of GBP1,322.7 million. The
directors consider the Company to have a strong financial position
which, when coupled with the preference of its parent company,
Berkshire Hathaway Energy Company ("Berkshire Hathaway Energy"),
for operating with lower levels of debt than equivalent companies
in the sector, creates a stable base for continued strong
performance during the ED1 period.
Finance costs and investments: Finance costs net of investment
income at GBP48.2 million were GBP1.8 million higher than the prior
year due to impact a full year of 2016 financing and lower
investment income.
Taxation: The effective tax rate in the year was 18.7%.
Corporation tax of GBP28.6 million was paid in the year, this was
higher than the prior year of GBP3.0 million due to the conclusion
of a tax claim with HMRC in 2016. Details of the income tax expense
are provided in Note 7 to the financial statements.
Share capital: There were no changes to the Company's share
capital during the year.
Cash flow: The Company aims to collect from customers and pay
suppliers within contracted terms. Any surplus cash held is
remitted to Yorkshire Electricity Group plc ("YEG"), a company in
the Northern Powergrid Group, and invested accordingly, generating
a market rate of return for the Company. Movements in cash flows
were as follows:
- Operating Cash flow from operating activities
activities at GBP174.6 million was GBP41.1 million
lower than the previous year, mainly
due to higher tax paid, adverse working
capital movements, and lower profit.
- Investing Net cash used in investing activities
activities at GBP157.4 million was GBP25.9 million
lower than the previous year, reflecting
lower capital expenditure and higher
customer contributions.
- Financing The net cash used in financing activities
activities at GBP30.6 million was GBP51.9 million
higher than prior year reflecting the
lower external financing taken out in
the year.
NORTHERN POWERGRID (YORKSHIRE) PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
REVIEW OF THE YEAR - continued
FINANCIAL STRENGTH - continued
Pensions: The Company is a participating employer in the
Northern Powergrid Group of the Electricity Supply Pension Scheme
(the "Scheme"), a defined benefit scheme. Further details of the
Company's commitments to the Scheme and the associated deficit
repair payments are provided in Note 22 to the financial
statements. The Company also participates in the Northern Powergrid
Pension Scheme, which is a defined contribution scheme.
Insurance: As part of its insurance and risk strategy, the
Northern Powergrid Group has in place insurance policies, which
cover risks associated with employees, third party motor and public
liability. The Northern Powergrid Group carries appropriate
excesses on those policies and is effectively self-insured up to
the level of those excesses. Consequently, the risk management and
health and safety programmes are viewed as extremely important,
given the contribution they make to the elimination or reduction of
exposure to such risks.
CUSTOMER SERVICE
-------------- -------------------------------------------------
Strategic KPI 2017 2016
objective
-------------- --------------------------------- ------ ------
Delivering
exceptional
customer
service. BMCS 85.4% 86.0%
-------------- --------------------------------- ------ ------
BMCS Rank 12 9
------------------------------------------------ ------ ------
BMCS Power Cuts 87.6% 87.4%
------------------------------------------------ ------ ------
BMCS General Enquiries 87.8% 87.7%
------------------------------------------------ ------ ------
BMCS Connections 83.0% 84.6%
------------------------------------------------ ------ ------
SECV rank (combined with
Northern Powergrid (Northeast)
Limited 3 5
------------------------------------------------ ------ ------
Strategic focus: To improve the service delivered to
customers.
Performance during the year:
Under the broad measure of customer satisfaction ("BMCS"), an
independent market research company carried out telephone surveys
with the Company's customers to find out how satisfied they were
with services related to unplanned or planned power cuts,
quotations and subsequent connections, and general enquiries. The
Company recorded an overall satisfaction score of 85.4%, which was
comparable to the prior year (86.0%). To further enhance the
service provided to customers, a number of initiatives from the
Company's customer experience improvement plan were implemented
during the year. This included the continued development of the
customer relationship management system and enhancing the
self-service offerings available to customers.
Throughout the year, further improvements were made to the way
in which the Contact Centre operates were implemented. The Quality
Management Framework that was launched in 2016 to define the
standards required of Contact Centre colleagues to deliver
exceptional customer service was extended to incorporate the
connections business. In addition, the Contact Centre was
restructured to introduce a metering defect customer support team,
designed to effectively support customers during the government's
smart meter roll-out programme.
In May 2017, the Company, together with its affiliate Northern
Powergrid (Northeast) Limited, put forward its Stakeholder
Engagement and Customer Vulnerability ("SECV") submission to the
Office for Gas and Electricity Markets ("Ofgem") in respect of its
work during the year. The submission provided an overview of
initiatives including an increased focus on data quality which had
resulted in cleansing the Company's Priority Services Register
("PSR") and strengthening relationships with partners who deliver
key services to customers. Following the submission to Ofgem's
panel, the position of the Company in the context of the wider DNO
group increased from fifth place to third. The improvement
demonstrated the effectiveness of the revised stakeholder
engagement strategy launched in 2016.
NORTHERN POWERGRID (YORKSHIRE) PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
REVIEW OF THE YEAR - continued
CUSTOMER SERVICE - continued
Connections to the network
Strategic focus: To further implement customer service
improvements in support of the commitment to reduce routine, small
works end-to-end connections lead times by 30% during the ED1
period, actively facilitate the development of competition from
independent connections providers ("ICPs") and deliver the major
works service improvement plan as part of the Ofgem Incentive on
Connections Engagement ("ICE").
Performance during the year:
Within connections services, work continued on the
transformation of the small works connections business to improve
customer service. A new process was implemented during January 2017
which introduced a single point of customer contact for the
delivery of small works connections. In parallel the online service
alterations process was overhauled to offer customers more choice
in the way they receive a quotation.
The Company continued to embed the processes introduced by the
Competition in Connections Code of Practice. This included the
provision of dual quotations, enabling ICPs to self-determine and
approve points of connection to the network and simplifying the
authorisation process for ICPs' operational staff.
During the year, the Company commenced began the delivery of 22
actions included in the major works service improvement plan as
part of the ICE. Working proactively with customers and obtaining
their feedback, the Company formally increased the number of
improvement actions to 31 during the midyear return to Ofgem. All
actions were completed and Ofgem determined that the Company had
met the assessment criteria for developing and delivering the ICE
service improvement plan.
Corporate responsibility
Strategic focus: To build effective relationships with customers
and other stakeholders whilst maximising the value of contact with
customers, especially those who are vulnerable and hard to
reach.
Performance during the year: The Company worked closely with key
partners such as the Environment Agency, local authorities and
local resilience forums, particularly during periods of severe
weather. Collaboration with stakeholders in the wider energy
industry included the continued promotion of the national '105'
number and preparation for the January 2018 overhead line safety
campaign, an Energy Networks Association initiative, supported by
DNOs.
With the assistance of the Social Issues Expert Group (which
includes external experts and advisers) the Company further
developed the services provided to vulnerable customers including
those on the PSR. To improve the accessibility and knowledge of the
services available to vulnerable customers, a network of partners
was established with community and third sector organisations.
Safety remains the Company's first priority and underpins all
operations. Accordingly, the Northern Powergrid Group has
maintained its support to charitable organisations and continued to
sponsor the "Safety Champions" initiative, which is aimed at
enhancing safety performance. Throughout the year, the Northern
Powergrid Group engaged with thousands of school children through
its series of safety events, and in addition, became the sponsor of
the Cub Home Safety Activity Badge which has been designed to teach
Cub Scouts about safety in and around the home.
Supporting customers through the use of tailored education
programmes continued throughout 2017. Activity included, Make the
Grade in Energy, an education, skills and employability programme,
Energy Heroes, targeted at the primary school pupils to promote
awareness of energy costs and ways of saving energy, and attendance
at The Big Bang Fair, which encourages young people to pursue
science, technology, engineering and maths subjects.
NORTHERN POWERGRID (YORKSHIRE) PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
REVIEW OF THE YEAR - continued
OPERATIONAL EXCELLENCE
--------------- -----------------------------------------------------------------
Strategic KPI 2016/17 2015/16
objective
--------------- -------------------------- ---------------- -------------------
Actual Target Actual Target
--------------- -------------------------- ------- ------- --------- --------
High-quality,
efficient
operators
running
a smart
reliable
energy Customer Minutes
system. Lost 38.0 <61.6 41.8 <63.1
--------------- -------------------------- ------- ------- --------- --------
Customer Interruptions 48.5 <67.5 52.5 <68.5
------------------------------------------ ------- ------- --------- --------
KPI 2017 2016
------------------------------------------ ---------------- -------------------
Actual Actual
------------------------------------------ ---------------- -------------------
Network investment GBP213.9 GBP225.1 million
million
------------------------------------------ ---------------- -------------------
High voltage restoration 51.0 minute 52.8 minute
time
------------------------------------------ ---------------- -------------------
Strategic focus: To provide, maintain and invest in an efficient
distribution network that delivers electricity effectively.
Enhancing the reliability of the network in support of the
commitment to achieve 8% fewer unplanned power cuts and reduce the
average length of unplanned power cuts by 20% during the ED1
period.
Performance during the year: Customer minutes lost ("CML") and
customer interruptions ("CI") are the key performance indicators
set by Ofgem and used by the Company to measure the quality of
supply and system performance. Both CML and CI are measured on a
regulatory year basis which commences on 1 April of any given year
and concludes on 31 March of the subsequent year. CML measures the
average number of supply minutes lost for every connected customer
due to both planned and unplanned power cuts that last for three
minutes or longer. CI measures the average number of supply
interruptions per every 100 connected customers due to planned and
unplanned power cuts that last for three minutes or longer. In
respect of these key customer service performance indicators, the
goal is to achieve performance that is below Ofgem's target number.
The Company's performance during the most recent regulatory year
was better than Ofgem's target for both CML and CI.
The Company invested GBP213.9 million during the year through
its approved network investment strategy (2016: GBP225.1 million),
which has been designed to deliver improvements and increase the
network's resilience. Various major projects were undertaken to
reinforce the primary network, replace plant, refurbish
transformers, rebuild overhead lines, remove and replace oil-filled
cables, change deteriorated poles, replace switchgear and install
and commission new remote control points.
Enhancements to the network continued through investment into
the use of technology including the expansion of the automated
power restoration system ("APRS"). In the event of a high-voltage
fault, APRS analyses the information presented by intelligent
assets installed on the network and, from that information,
determines where the fault is located and executes switching to
restore power to the 'healthy' network in a safe manner in under
three minutes. It is planned to enable APRS at 306 primary
substations across the Northern Powergrid Group by the end of the
ED1 period. The Company's high-voltage restoration performance
during the calendar year 2017 averaged some 51.0 minutes (2016:
52.8 minutes), after allowing for severe weather incidents and
other exemptions.
The Company aims to respond effectively to the needs of
customers and local communities and to achieve the guaranteed
standard for the restoration of supply: restoration within 12 hours
of a power cut occurring under normal weather conditions. The
Company's major incident management procedure is utilised during
severe weather events that affect the network.
NORTHERN POWERGRID (YORKSHIRE) PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
REVIEW OF THE YEAR - continued
EMPLOYEE COMMITMENT
-------------------- ----------------------------------------------------------------
Strategic KPI (Calendar year) 2017 2016
objective
-------------------- ---------------------------- ---------------- ----------------
Actual Target Actual Target
-------------------- ---------------------------- ------- ------- ------- -------
High-performing
people doing
rewarding Occupational Safety
jobs in and Health Administration
a safe and Rate (Northern
secure workplace. Powergrid Group) 0.44 0.26 0.30 0.30
-------------------- ---------------------------- ------- ------- ------- -------
Preventable Vehicle
Accidents 17 9 12 13
------------------------------------------------- ------- ------- ------- -------
Lost time accidents 5 2 4 2
------------------------------------------------- ------- ------- ------- -------
Restricted duty
accidents 1 1 0 1
------------------------------------------------- ------- ------- ------- -------
Medical treatment
accidents 0 1 1 1
------------------------------------------------- ------- ------- ------- -------
Operational incidents 6 6 4 6
------------------------------------------------- ------- ------- ------- -------
Northern Powergrid
Group Absence rate 2.9% 2.9%
------------------------------------------------- ------- ------- ------- -------
Health and Safety
Strategic focus: To deliver a comprehensive safety and health
improvement plan ("SHIP") resulting in world class safety
performance and to achieve the Northern Powergrid Group commitment
of halving its accident rate during the ED1 period.
Performance during the year: In common with the Berkshire
Hathaway Energy group, the Northern Powergrid Group measures its
safety performance in terms of the Occupational Safety and Health
Administration ("OSHA") rate, which is a measure used in the United
States to capture safety incidents down to minor levels of medical
treatment. The Northern Powergrid Group missed its target OSHA rate
of 0.26 (2017: 0.44) recording a total of ten recordable incidents
against a target of six. Whilst the outcome was disappointing, the
Company's long term safety record suggests that it is one of the
safest in its sector. This has been recognised in the form of a
Gold President's Award from the Royal Society for the Prevention of
Accidents for the achievement of 13 consecutive Gold Awards. The
Company failed to meet both the preventable vehicle accidents and
lost time accident targets. The failure to meet these targets was
primarily the result of a series of relatively minor driving
incidents and trips, slips and falls. The Company continues to take
action to seek to minimise these lower level risks.
Improving safety performance remains a priority and the way in
which this is achieved is set out in the Company's SHIP. The SHIP
focuses on leadership engagement, improving two-way communication
on safety issues, supervisory oversight, ensuring managers and
supervisors fulfil their safety inspection programmes and provide
regular coaching and instruction to work teams, and workplace risk
management, to develop competence in identification and risk
mitigation methods. These three areas are supported by driver
training, operational safety seminars, stand-down briefings and
regular safety reports and newsflashes.
The Company's OHSAS 18001 health and safety management systems
successfully retained certification.
Employees
Strategic focus: To effectively manage headcount whilst
emphasising the importance of leadership and high standards of
performance in support of the Core Principles by engaging,
collaborating and working with employees and their trade union
representatives.
NORTHERN POWERGRID (YORKSHIRE) PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
REVIEW OF THE YEAR - continued
EMPLOYEE COMMITMENT - continued
Performance during the year:
The Company has adopted the Berkshire Hathaway Energy code of
business conduct, which details the commitment to ethics and
compliance with the law, provides reporting mechanisms for known or
suspected ethical or legal violations, and establishes minimum
standards of behaviour expected of all employees. In support of
this, a "speaking up" process is in place enabling all staff to
raise concerns of unethical acts, malpractice or impropriety
(including bribery or corruption), and an anonymous help line
operated by an independent company is also available.
In order to support the well-being of its employees, the
Northern Powergrid Group provides an independent employee
assistance service to all staff. The programme is a confidential,
self-referral counselling and information service to assist with
personal or work-related problems that may be affecting health,
wellbeing or performance and is available 24 hours a day, 365 days
a year. Working with its occupational health provider, the Northern
Powergrid Group is delivering a long-term programme aimed at
improving the health of its staff.
During the year, 68 new recruits (2016: 71) joined the Northern
Powergrid Group workforce renewal programme, including for the
first time, two Cyber Apprentices. In addition, 19 trainees
graduated from their training programmes.
The Northern Powergrid Group has adopted a number of policies
(including the policy on diversity at work and code of business
conduct) that collectively comprise the policy on diversity.
Diversity is actively supported through recruitment, educational
programmes, employee opportunities and the Global Days of Service
charitable support programme. All appointments are based on merit
with due regard for diversity, including gender.
At 31 December 2017, the Company employed 1,191staff (2016:
1,184).
ENVIRONMENTAL RESPECT
---------------- ----------------------------------------------------------
Strategic KPI 2017 2016
objective
---------------- -------------------- ----------------- -----------------
Actual Target Actual Target
---------------- -------------------- ------- -------- ------- --------
Leaders in
environmental
respect and
low carbon Total Oil/Fluid
technologies. Lost (litres) 18,101 <18,900 15,722 <25,714
---------------- -------------------- ------- -------- ------- --------
SF6 Gas discharges
(kg) 68.78 <78.00 99.95 <84
------------------------------------- ------- -------- ------- --------
Environmental
Incidents 8 <5 3 <7
------------------------------------- ------- -------- ------- --------
Carbon Footprint
(tonnes) 28,884 30,518
------------------------------------- ------- -------- ------- --------
Strategic focus: Deliver Environmental "RESPECT"
(Responsibility, Efficiency, Stewardship, Performance, Evaluation,
Communication and Training) in doing so achieve our commitment to
reduce oil and fluid loss by 15% and reduce our business carbon
footprint by 10% during the ED1 period.
Performance during the year:
The Company has operated a United Kingdom Accreditation Service
scheme for environmental management since the late 1990s and is
certified to the environmental management systems standard ISO
14001: 2015. A full recertification assessment was carried out in
March 2017 and a surveillance audit conducted in September 2017.
Continued certification was confirmed following each audit.
The Company's carbon footprint reporting framework is certified
under the Certified Emissions Measurement and Reduction Scheme for
compliance with ISO 14064-1:2006. The last full audit was
undertaken in October 2017 where continued certification was
confirmed. Initiatives including the implementation of telematics
in fleet vehicles have facilitated a further improvement in
reducing the Company's carbon footprint during the year to 28,884
tonnes (2016: 30,518 tonnes).
In support of the target to further reduce oil and fluid loss,
the 2017 annual environmental improvement plan included replacing
fluid-filled cables and locating cable fluid leaks more quickly
which resulted in a total fluid loss of 18,101 litres (2016:
15,722). Additional activity to minimise the Company's impact on
the environment included placing overhead lines underground in
National Parks and Areas of Outstanding Natural Beauty and
protecting wildlife and habitat.
NORTHERN POWERGRID (YORKSHIRE) PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
REVIEW OF THE YEAR - continued
Sustainability
Strategic focus: To help facilitate the United Kingdom's
transition to a low-carbon economy in the Company's capacity as a
major participant in the United Kingdom energy industry and in
terms of its own carbon footprint.
Performance during the Regulatory Year:
As the country takes action to make significant reductions in
its carbon emissions, the way in which electricity is produced and
used is expected to have a substantial impact on the electricity
network over time. This has already been seen through the number of
low-carbon technology installations such as photovoltaic solar
panels, electric vehicles and heat pumps. The volume and total
capacity of decentralised energy generation has also been growing
steadily and, given the greater range of load and generation
technologies now connected to the network, the Company is taking
action to develop innovative solutions that will reduce the need
for traditional and potentially expensive reinforcement of the
network.
From an innovation perspective, the Company is running a
portfolio of projects in the priority areas of smart grids, smart
meters, digital-enabled customer service and affordability.
A partnership with Nissan is supporting new electric vehicle
projects for the trialling of 'vehicle to grid' technology to
enable car users to supply power to the electricity network. In
addition, a new project was launched in the year to develop hybrid
battery technology to expedite the restoration of the electricity
supply following a power cut. Collaboration with Northern Gas
Networks at the Integrel demonstrator site continues to assess the
potential future benefits of integrating both gas and electricity
energy systems. The Company is also scoping the role of
distribution system operator ("DSO") with a new project to explore
the value of the transition for customers and to understand the
business changes that are required to realise those benefits.
The Northern Powergrid Group climate change adaptation strategy
recognises the impact that climate change is anticipated to have on
the business, the risks this poses and the proposed actions to
mitigate these risks including vegetation management, network
specifications for changing temperatures and improved weather
prediction. The installation of flood defences is one such key
activity that is already underway and the delivery of the committed
programme in the ED1 period remains on track.
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
REVIEW OF THE YEAR - continued
REGULATORY INTEGRITY
-------------------- -------------------------------------
Strategic objective KPI
-------------------- -------------------------------------
Trustworthy, Completion of a quarterly regulatory
fair and balanced, compliance affirmation process
creating win-win
outcomes.
-------------------- -------------------------------------
Strategic focus: To manage the Company's business to the highest
behavioural standards and adhere to a policy of strict compliance
with all relevant standards, legislation and regulatory
conditions.
Performance during the year:
Under the RIIO (revenue = incentives + innovation + outputs)
model for regulation, price controls are set for eight years with
provision for a mid-period review if there are changes to the
outputs that network companies are required to deliver. The ED1
price control became effective on 1 April 2015 and is due to end on
31 March 2023. The Company's base allowed revenue (excluding the
effects of incentive schemes and any deferred revenues from the
prior price control) before inflation reduced by 0.5% for the
regulatory year ended 31 March 2017, relative to the previous
regulatory year. Base allowed revenues before inflation remain
constant for each subsequent regulatory year through to the 31
March 2023. Nominal base allowed revenues will increase in line
with inflation (as measured by the United Kingdom's Retail Prices
Index).
In order to assure compliance with licence and other regulatory
obligations, the Company operates a regulatory compliance
affirmation process, under which ownership of approximately 1,950
regulatory obligations are assigned to around 80 responsible
managers. Those responsible managers are required to review
compliance with the relevant obligations on a quarterly basis and
report on any identified non-compliances or perceived risks which
are then addressed by members of the executive team. To minimise
the risk of the Company breaching its licence conditions and other
statutory requirements (which could lead to financial penalties),
the board of directors review the outcome of each quarter's
exercise.
The Company submits a number of information returns to Ofgem and
is required, under the terms of the Company's licence, to assure
the accuracy of those returns. These arrangements involve the
preparation and submission to Ofgem, by the end of February in each
year, of a risk-based data-assurance plan for the regulatory year
ahead, together with a report detailing the assurance work actually
carried out in the regulatory year just ended and the findings of
that work.
NORTHERN POWERGRID (YORKSHIRE) PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
PRINCIPAL RISKS AND UNCERTAINTIES
The Northern Powergrid Group operates a structured and
disciplined approach to the management of risk as part of its
overall risk management policy and in support of its financial
reporting practices. A robust system is in place to facilitate the
identification of new risks, including those associated with the
achievement of the Northern Powergrid Group's strategic objectives
and Core Principles. Once identified, key risks and their
respective controls and mitigation plans are continually assessed
and formally reviewed by the Governance and Risk Management Group,
which reports to the Audit Committee.
Supported by the internal audit function, the risk management
programme includes regular reviews of the crisis management,
disaster recovery and major incident plans. To determine the level
of disaster preparedness and responsiveness against threats to
business continuity, risk management plans and processes are
periodically tested. This self-evaluation approach is reinforced by
that of the Berkshire Hathaway Energy group, which continue to
benchmark risk management activities across its business units and
share significant lessons learned.
Category Risk / Uncertainty Mitigation
---------- ----------------------------- --------------------------------
Financial The Gas and Electricity Appeal to the Competition
Markets Authority ("GEMA") and Markets Authority
resetting the price against a decision by
control formula (which GEMA to proceed with
determines the maximum such a modification.
permitted revenue for
each Regulatory Year)
set out in the electricity
distribution licence
without the consent
of the electricity
distribution licence
holder.
---------- ----------------------------- --------------------------------
Financial The Company costs increase The Company monitors
or change by more than performance against regulatory
RPI having a direct allowances including
impact on the Company's forecasts for the remainder
financial results. of the price period and
The rate of inflation takes appropriate corrective
as measured by RPI action to ensure it lives
is taken into account within regulatory allowances.
in setting the Company's
allowed income in respect
of each regulatory
year.
---------- ----------------------------- --------------------------------
Financial Changes in performance Performance against incentives
under incentive schemes, is routinely measured
such as in customer and management action
service, may lead to taken to address any
adjustments to allowed performance issues.
revenues.
---------- ----------------------------- --------------------------------
Financial Cost of the defined The cost of the defined
benefit pension schemes benefit pension scheme,
and the possible effect including deficit repair
on the current deficit payments, is managed
position. in triennial cycles by
negotiation with the
trustees of the scheme.
On-going and repair costs
form part of the assessment
of cost made by Ofgem
in each price control,
and if judged efficient,
these costs are permitted
to be recovered through
revenues at a stable
level to provide certainty
for customers.
The Company works with
scheme trustees to ensure
that scheme judgements
reflect this indirect
obligation to customers.
---------- ----------------------------- --------------------------------
Financial The existing Data Protection A programme to identify
policies and procedures the impact of GDPR and
are not sufficient the actions required
to comply with the ahead of the regulation
additional requirements becoming effective in
of the incoming General May 2018 is in place
Data Protection Regulation and is under regular
("GDPR"). review.
---------- ----------------------------- --------------------------------
Financial Interest rate risk The Company is financed
- the exposure to uncertain by long-term borrowings
future interest rates. at fixed rates and has
access to short-term
borrowing facilities
at floating rates of
interest. As at 31 December
2017, 100% of the Company's
long-term borrowings
were at fixed rates and
the average maturity
for these borrowings
was 9 years.
---------- ----------------------------- --------------------------------
NORTHERN POWERGRID (YORKSHIRE) PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
PRINCIPAL RISKS AND UNCERTAINTIES - continued
Category Risk / Uncertainty Mitigation
--------------- ------------------------------- ----------------------------------
Financial Trading risk - investments The Company's policy is
fail to deliver anticipated that no trading in financial
outcome instruments should be
undertaken.
--------------- ------------------------------- ----------------------------------
Financial Major Incidents (including A number of major incident
/ Operational weather and terrorism and crisis management
attacks) causing network policies, plans and governance
disruption resulting arrangements are in place
in customer service to react to and deal with
penalties and a reduction such situations. In addition,
in the number of units an industry mutual aid
delivered on which agreement is in place.
income is charged. The initiatives (including
network investment) under
the operational excellence
Core Principle are in
place to ensure grid resilience
is maintained.
--------------- ------------------------------- ----------------------------------
Operational Health and Safety Health and Safety is given
incident - The electricity the highest priority within
distribution business the Company and clear
is inherently hazardous. policies and procedures
Employees work at are in place both to ensure
height, in closed the safety of the employees
spaces, alone and and customers but also
with live electricity, ensure compliance with
increasing the risk relevant legislation.
of potential safety
incidents.
--------------- ------------------------------- ----------------------------------
Operational Cyber-attack or cyber-security A robust cyber security
breach affecting hardware, risk mitigation programme
systems, customer is in place including
data or intellectual accreditation under the
property. ISO 27001 Information
Security (process security)
standard for certain discrete
business areas and compliance
with the Centre for Internet
Security Critical Security
Controls. Further advances
are being continuously
implemented and managed.
--------------- ------------------------------- ----------------------------------
Operational The take-up of low-carbon In addition to smart grid
technologies and the deployment activity, the
resulting effect on Company has a range of
the networks capacity. innovation projects to
develop and demonstrate
future technologies and
commercial practices.
The Company is considering
how the transition to
a DSO role could assist
customers to connect more
low carbon technologies.
--------------- ------------------------------- ----------------------------------
Commercial The emergence of increased The Company is setting
competition in the out the policy position
electricity distribution supporting the expanded
market including the role of DSO which is underpinned
emerging role of DSO. by electricity distributors
being ideally placed to
deliver benefits to customers
from a DSO role and to
maintain overall accountability
for the stability of local
networks.
--------------- ------------------------------- ----------------------------------
Commercial Credit control - protecting The Company requires strict
the Company from incurring adherence to credit checking,
bad debt and maintaining payment terms, payment
strong cash flow. performance tracking and
debt management policies
--------------- ------------------------------- ----------------------------------
Commercial Credit-cover arrangements The relationship with
with electricity suppliers. energy suppliers, including
credit-cover arrangements,
is governed by a distribution
connection and use of
system agreement which
sets out how creditworthiness
will be determined and,
as a result, whether the
supplier needs to provide
collateral.
--------------- ------------------------------- ----------------------------------
Commercial Availability of resource The Company uses a mix
to deliver work programmes. of direct labour and contracted
resource to facilitate
the delivery of work programmes
(including the capital
expenditure programme).
--------------- ------------------------------- ----------------------------------
NORTHERN POWERGRID (YORKSHIRE) PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
PRINCIPAL RISKS AND UNCERTAINTIES - continued
Internal Control
A rigorous internal control environment exists within the
Northern Powergrid Group to support the financial reporting
process, the key features of which include regular reporting, a
series of operational and financial policy statements,
investigations undertaken by internal audit and a stringent process
for ensuring the implementation of internal audit recommendations.
In addition, the Northern Powergrid Group utilises comprehensive
business planning procedures, regularly reviews key performance
indicators to assess progress towards its goals, and has a strong
internal audit function to provide independent scrutiny. Financial
controls include a centralised treasury operations and established
procedures for the planning, approving and monitoring of major
capital expenditure.
In accordance with Berkshire Hathaway Energy's requirements to
comply with the United States Sarbanes-Oxley Act, the Company
undertakes a quarterly risk control assessment confirming that the
effectiveness of the system of internal controls has been reviewed
during the year. A self-certification process is in place, in
support of this review, whereby certain senior managers are
required to confirm that the system of internal control in their
area of the business is operating effectively. Consequently, the
directors believe that a robust system of risk assessment and
management is in place.
The Company does not have a specific human rights policy.
However, in accordance with the Core Principles, it remains fully
committed to operating ethically and responsibly and with fairness
and integrity. This is implemented through the policies and
procedures it has in place which are applicable to all stakeholder
groups and encompasses employees' health, safety and welfare,
dealings with customers, particularly those who are vulnerable, the
impact of the Company on the environment and the contribution to
sustainability.
The Northern Powergrid Group is committed to maintaining the
highest ethical standards in the conduct of its business and,
implements Berkshire Hathaway Energy's code of business conduct,
details of which can be found on page 8. The Company has robust
procedures in place to meet the requirements of the Bribery Act
2010.
ON BEHALF OF THE BOARD:
P A Jones
Director
24 April 2018
NORTHERN POWERGRID (YORKSHIRE) PLC
REPORT OF THE DIRECTORS
FOR THE YEARED 31 DECEMBER 2017
The directors present their report together with the audited
financial statements and the auditor's report for the year ended 31
December 2017.
DIVIDS
During the year, an interim dividend of GBP29.8 million was paid
(2016: GBP28.7 million). The directors recommend that no final
dividend be paid in respect of the year (2016: GBPnil).
The Company's dividend policy is that dividends will be paid
only after having due regard to available distributable reserves,
available liquid funds and the financial resources and facilities
needed to enable the Company to carry on its business for at least
the next year. In addition, the level of dividends is set to
maintain sufficient equity in the Company so as not to jeopardise
its investment grade issuer credit rating.
RESEARCH AND DEVELOPMENT
The Company supports a programme of research that is expected to
contribute to higher standards of performance and a more
cost-effective operation of its business. New activities initiated
in the year included projects regarding the use of bi-directional
power flow to electric vehicles, an improved methodology to
determine the overall societal impact of network investment and
operations, a project to understand and test cross-vector energy
systems in collaboration with the regional gas distribution network
operator and a project to explore and understand the technical and
economic opportunities and implications of the DSO role.
During the year, the Company invested GBP1.7 million (2016:
GBP1.6 million) (Note 6 to the financial statements) in its
research and development activities.
FUTURE DEVELOPMENTS AND FUTURE OUTLOOK
The financial position of the Company, as at 31 December 2017,
is shown in the statement of financial position on page 23. There
have been no significant events since the year end. The directors
intend that the Company will continue to implement its
well-justified business plan during the remainder of the ED1 price
control and by delivering the strategic objectives linked to the
Core Principles, the Company will continue to develop its business
by efficiently investing in the network and improving the quality
of supply and service provided to customers. There are no plans to
change the existing business model.
DIRECTORS
The directors who held office during the year under review and
to the date of signing were:
R Dixon Non-executive Director (retired 26 October
2017)
T E Fielden Finance Director
J M France Regulation Director
T H France General Counsel
N M Gill Operations Director
P A Jones President and Chief Executive Officer
A J Maclennan Business Development Director
A R Marshall Non-executive Director
P C Taylor Non-executive Director
During and as at the end of the year, none of the directors was
interested in any contract, which was significant in relation to
the business of the Company.
During the financial year and up to the date of approval of the
Report of the Directors, an indemnity contained in the Company's
Articles of Association was in force for the benefit of the
directors of the Company and as directors of associated companies,
which was a qualifying indemnity provision for the purposes of the
Companies Act 2006.
FINANCIAL RISK MANAGEMENT
Details of financial risks are included in the Principal Risks
and Uncertainties on page 11-14 of the Strategic Report.
FINANCIAL DERIVATIVES
As at 31 December 2017 and during the year it was the Company's
policy not to hold any derivative financial instruments.
NORTHERN POWERGRID (YORKSHIRE) PLC
REPORT OF THE DIRECTORS
FOR THE YEARED 31 DECEMBER 2017
POLITICAL DONATIONS
No contributions were made to political organisations during the
year (2016: GBPnil).
EMPLOYEES
Employee consultation
A constitutional framework agreed with trade union
representatives exists in respect of employee consultation. The
management team keep employees and trade union representatives
informed of and involved as appropriate in developments that may
impact them now or in the future.
Employee engagement continues to show improvement with local
action plans augmented by routine communication channels including
regular staff briefings, meetings with staff and their
representatives, and utilising the Northern Powergrid Group's
intranet.
During the year, the President and Chief Executive Officer of
the Northern Powergrid Group continued to provide employees with
updates on the Northern Powergrid Group's financial,
organisational, safety and customer service performance through
regular electronic briefings.
Disabled employees
The Company is committed to equality at work and, as such, its
policy is to provide all protected groups, including disabled
people, with equality at work in respect of employment, training,
career development and promotion, having regard to their aptitudes
and abilities. Should any member of staff become disabled during
their employment, the Company will make reasonable adjustments,
wherever possible.
In accordance with section 414c of the Companies Act 2006
disclosures concerning relations with employees and greenhouse gas
emissions can be found on pages 7 and 8 of the Strategic
Report.
CORPORATE GOVERNANCE STATEMENT
The directors have elected to apply the exception set out in
Section 1B.1.6R of the Disclosure and Transparency Rules
("DTR").
AUDIT COMMITTEE
The board of Northern Powergrid Holdings Company has established
an audit committee for the Northern Powergrid Group under delegated
terms of reference which carries out the functions required by DTR
7.1.3 R.
Committee members:
J Reynolds Non-Executive Director (appointed as
Chairman on 26 October 2017)
R Dixon Non-Executive Director (retired 26 October
2017)
T E Fielden Finance Director
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Strategic
Report, the Report of the Directors and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law, the directors
have elected to prepare the financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union. Under company law, the directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that
period.
NORTHERN POWERGRID (YORKSHIRE) PLC
REPORT OF THE DIRECTORS
FOR THE YEARED 31 DECEMBER 2017
STATEMENT OF DIRECTORS' RESPONSIBILITIES - continued
In preparing these financial statements, International
Accounting Standard 1 requires the directors to:
- Properly select and apply accounting policies;
- Present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information;
- Provide additional disclosures when compliance
with the specific requirements in IFRSs are insufficient
to enable users to understand the impact of particular
transactions, other events and conditions on the
Company's financial position and financial performance;
and
- Make an assessment of the Company's ability to
continue as a going concern.
Each of the directors as at the date of the Annual Reports and
financial statements, whose names and functions are set out on page
15 in the Report of the Directors confirms that, to the best of
their knowledge the Company's financial statements, prepared in
accordance with applicable UK law and in conformity with IFRS, give
a true and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the Strategic Report and the
Report of the Directors include a fair review of the development
and performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties it faces.
NON-FINANCIAL INFORMATION STATEMENT
In accordance with Section 414CB(7) of the Companies Act 2006,
the directors have elected to set out the information required by
Section 414CB (1) to (6) in the group annual report and audited
consolidated financial statements of Northern Powergrid Holdings
Company, a copy of which can be found on Northern Powergrid's
corporate website.
GOING CONCERN
A review of the Company's business activities during the year,
together with details regarding its future development, performance
and position, its objectives, policies and processes for managing
its capital, its financial risk management objectives and details
of its exposures to trading risk, credit risk and liquidity risk
are set out in the Strategic Report, the Report of the Directors
and the appropriate notes to the financial statements.
When considering continuing to adopt the going concern basis in
preparing the annual reports and financial statements, the
directors have taken into account a number of factors, including
the following:
- The Company is a stable electricity distribution
business operating an essential public service
and is regulated by GEMA. In carrying out its
functions, GEMA has a statutory duty under the
Electricity Act 1989 to have regard to the need
to secure that licence holders are able to finance
the activities, which are the subject of obligations
under Part 1 of the Electricity Act 1989 (including
the obligations imposed by the electricity distribution
licence) or by the Utilities Act 2000;
- The Company is profitable with strong underlying
cash flows and holds investment grade credit ratings;
and
- The Company is financed by long-term borrowings
with an average maturity of 9 years and has access
to borrowing facilities provided by Lloyds Bank
plc, Royal Bank of Scotland plc and Abbey National
Treasury Services plc.
Consequently, after making enquiries, the directors have a
reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the annual reports and financial statements.
NORTHERN POWERGRID (YORKSHIRE) PLC
REPORT OF THE DIRECTORS
FOR THE YEARED 31 DECEMBER 2017
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
Each of the directors, who is a director of the Company as at
the date of this report, confirms that:
a) so far as he is aware, there is no relevant audit
information of which the Company's auditor is
unaware; and
b) he has taken all the steps he ought to have taken
as a director in order to make himself aware of
any relevant audit information and to establish
that the auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the Companies Act
2006.
AUDITOR
Deloitte LLP will continue in office in accordance with the
provisions in Section 487 of the Companies Act 2006 and has
indicated its willingness to do so.
ON BEHALF OF THE BOARD:
P A Jones
Director
24 April 2018
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF
NORTHERN POWERGRID (YORKSHIRE) PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion on financial statements
In our opinion the financial statements:
- give a true and fair view of the state of the
company's affairs as at 31 December 2017 and of
its loss for the year then ended;
- have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs)
as adopted by the European Union and IFRSs; and
- have been prepared in accordance with the requirements
of the Companies Act 2006.
We have audited the financial statements of Northern Powergrid
(Yorkshire) plc (the 'company') which comprise:
- the statement of profit or loss;
- the statement of profit or loss and other comprehensive
income;
- the statement of financial position;
- the statement of changes in equity;
- the statement of cash flows; and
- the notes to the financial statements.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the European
Union.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
auditor's responsibilities for the audit of the financial
statements section of our report.
We are independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC's Ethical Standard as
applied to public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We confirm that the non-audit services prohibited by
the FRC's Ethical Standard were not provided to the company.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Summary of audit approach
- Key audit The key audit matter that we identified
matter in the current year was the overhead
allocation and the replacement of failed
assets
- Materiality The materiality that we used in the current
year was GBP7.2m which was determined
on the basis of 5% of profit before tax
for the year.
- Scoping We have performed the scoping of our
work by considering the risk associated
with each of the balances and the quantum
of the balance in the accounts relative
to our materiality. The main area of
focus of our testing was around fixed
assets, which represent the largest balance
within the accounts and our significant
risk area.
Conclusions relating to going concern
We are required by ISAs (UK) to report in respect of the
following matters where:
- the directors' use of the going concern basis
of accounting in preparation of the financial
statements is not appropriate; or
- the directors have not disclosed in the financial
statements any identified material uncertainties
that may cast significant doubt about the company's
ability to continue to adopt the going concern
basis of accounting for a period of at least twelve
months from the date when the financial statements
are authorised for issue.
We have nothing to report in respect of these matters.
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF
NORTHERN POWERGRID (YORKSHIRE) PLC - continued
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS - continued
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Management override of controls
Key audit matter Total additions in the year were GBP217m,
description which includes replacement of failed
assets and overheads. Due to the potential
for bias to be involved in making these
estimates, the nature of expenditure
capitalised by the distribution business
is a key audit matter, particularly
with regard to:
-- Replacement of failed assets - This
relates to costs of work carried out
on the electricity network which are
capitalised as opposed to expensed,
where they meet the criteria of enhancing
the network in some way upon the failure
of an asset. The key risk is that management's
judgement over which costs to capitsalise
are not in line with the nature of the
work being performed on the network.
-- Overheads - A portion of overheads
are capitalised to the extent they are
considered to relate to capital additions
that have taken place during the year.
The calculation of capitalised overheads
remains an area at risk of potential
bias due to the level of subjectivity
in the amounts capitalised. The key
risk here being management's judgement
in the amounts capitalised are not reflective
of the underlying work carried out.
How the scope We have reviewed the capital spend in
of the audit the year, the current policies in place
responded to and assessed their suitability in line
the key audit with IAS 16, along with reviewing of
matter the approach management takes towards
assessing capitalised overheads and
any changes introduced in the current
year.
We have tested additions to see if they
have been correctly treated in line
with the accounting policies in place
where they represent the replacement
of failed assets.
We have evaluated the design and implementation
of controls surrounding accounting for
capital spend.
We have reviewed the overhead allocation
model, including testing the underlying
expenditure being apportioned.
We have considered whether the apportionment
between entities is consistent with
the prior year.
Key observations The balances capitalised were found
to be consistent with the underlying
work being conducted and IAS 16.
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF
NORTHERN POWERGRID (YORKSHIRE) PLC - continued
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS - continued
Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Materiality GBP7.2m
Basis for determining 5% of profit before tax during the
materiality current year.
Rationale for the The company's primary activity is
benchmark applied to borrow funds to lend to other
group companies. Therefore the interest
income balance is considered to
be a key driver of company activity.
Our application of materiality - continued
We agreed with the Board of Directors that we would report to
the Board all audit differences in excess of GBP0.1m (2016:
GBP0.3m), as well as differences below that threshold that, in our
view, warranted reporting on qualitative grounds. We also report to
the Board of Directors on disclosure matters that we identified
when assessing the overall presentation of the financial
statements.
An overview of the scope of our audit
Northern Powergrid (Yorkshire) plc is a wholly owned subsidiary
of Northern Powergrid Holdings Company. The entity is the
distribution network operator for Yorkshire within the United
Kingdom, providing electricity to homes under the regulatory
oversight of Ofgem.
When deriving our significant risks, we have determined these
based on the materiality of the balances to the company, and the
likelihood of these risks to represent a possibility of fraud or
misstatement. As a result of our ongoing assessment of key business
risks each year, the presumed revenue recognition risk for the
regulated business was rebutted based on the lack of judgement
involved and the fact that revenues are predetermined by the
regulator.
Audit work to respond to the risks of material misstatement was
performed directly by the audit engagement team.
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF
NORTHERN POWERGRID (YORKSHIRE) PLC - continued
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS - continued
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there
is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in respect of these matters.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF
NORTHERN POWERGRID (YORKSHIRE) PLC - continued
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
- the information given in the strategic report
and the directors' report for the financial year
for which the financial statements are prepared
is consistent with the financial statements; and
- the strategic report and the directors' report
have been prepared in accordance with applicable
legal requirements.
In the light of the knowledge and understanding of the company
and its environment obtained in the course of the audit, we have
not identified any material misstatements in the strategic report
or the directors' report.
Matters on which we are required to report by exception
Adequacy of explanations Under the Companies Act 2006 We have nothing
received and we are required to report to report in
accounting records to you if, in our opinion: respect of
* we have not received all the information and these matters.
explanations we require for our audit; or
* adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
* the financial statements are not in agreement with
the accounting records and returns.
Directors' remuneration Under the Companies Act 2006 We have nothing
we are also required to report to report in
if in our opinion certain respect of
disclosures of directors' these matters.
remuneration have not been
made.
Other Matters
Auditor tenure Following the recommendation of the
audit committee, we were appointed by
the board of Northern Powergrid Holdings
Company in 1998 to audit the financial
statements for the year ending 31 December
1998 and subsequent financial periods.
The period of total uninterrupted engagement
including previous renewals and reappointments
of the firm is 19 years, covering the
years ending 31 December 1998 to 31
December 2017.
Consistency of Our audit opinion is consistent with
the audit report the additional report to the Board of
with the additional Directors we are required to provide
report to the in accordance with ISAs (UK).
Board of Directors
David M Johnson FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Newcastle upon Tyne
United Kingdom
24 April 2018
NORTHERN POWERGRID (YORKSHIRE) PLC
STATEMENT OF PROFIT OR LOSS
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Notes GBP'000 GBP'000
CONTINUING OPERATIONS
Revenue 3 413,477 415,126
Cost of sales (16,709) (16,799)
GROSS PROFIT 396,768 398,327
Operating expenses (209,179) (198,959)
OPERATING PROFIT 187,589 199,368
Other gains 388 483
Finance costs 5 (48,853) (47,522)
Finance income 5 621 1,116
PROFIT BEFORE INCOME
TAX 6139,745 153,445
Income tax 7 (26,137) (5,316)
PROFIT FOR THE YEAR 113,608 148,129
NORTHERN POWERGRID (YORKSHIRE) PLC
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2017
2017 2016
GBP'000 GBP'000
PROFIT FOR THE YEAR 113,608 148,129
OTHER COMPREHENSIVE INCOME - -
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR 113,608 148,129
NORTHERN POWERGRID (YORKSHIRE) PLC (REGISTERED NUMBER:
04112320)
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
2017 2016
Notes GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Intangible assets 10 - -
Property, plant and equipment 11 3,170,616 3,054,645
3,170,616 3,054,645
CURRENT ASSETS
Inventories 12 776 265
Trade and other receivables 13 72,864 68,499
Cash and cash equivalents 14 186,727 199,298
260,367 268,062
TOTAL ASSETS 3,430,983 3,322,707
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 15 290,000 290,000
Retained earnings 16 1,032,704 948,896
TOTAL EQUITY 1,322,704 1,238,896
LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables 17 780,039 762,475
Interest bearing loans
and borrowings 18 1,023,449 1,022,804
Deferred tax 21 127,963 127,673
Provisions 20 1,168 1,170
1,932,619 1,914,122
CURRENT LIABILITIES
Trade and other payables 17 124,193 115,229
Interest bearing loans
and borrowings 18 33,346 33,340
Tax payable 17,285 20,087
Provisions 20 836 1,033
175,660 169,689
TOTAL LIABILITIES 2,108,279 2,083,811
TOTAL EQUITY AND LIABILITIES 3,430,983 3,322,707
The financial statements were approved by the Board of Directors
on 24 April 2018 and were signed on its behalf by:
P A Jones
Director
NORTHERN POWERGRID (YORKSHIRE) PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2017
Called up
share Retained Total
capital earnings equity
GBP'000 GBP'000 GBP'000
Balance at 1 January 2016 290,000 829,467 1,119,467
Changes in equity
Dividends - (28,700) (28,700)
Total comprehensive income - 148,129 148,129
Balance at 31 December 2016 290,000 948,896 1,238,896
Changes in equity
Dividends - (29,800) (29,800)
Total comprehensive income - 113,608 113,608
Balance at 31 December 2017 290,000 1,032,704 1,322,704
NORTHERN POWERGRID (YORKSHIRE) PLC
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Notes GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 24 253,125 266,810
Finance costs paid (50,478) (49,301)
Dividends received 54 43
Interest received 567 1,073
Tax paid (28,649) (2,964)
Net cash from operating activities 174,619 215,661
Cash flows used in investing activities
Purchase of tangible fixed assets (213,222) (234,831)
Sale of tangible fixed assets 388 494
Receipt of customer contributions 55,444 51,006
Net cash used in investing activities (157,390) (183,331)
Cash flows used in financing activities
Movements in borrowings in the year - 50,000
Equity dividends paid (29,800) (28,700)
Net cash (used in)/from financing activities (29,800) 21,300
(Decrease)/increase in cash
and cash equivalents (12,571) 53,630
Cash and cash equivalents
at beginning of year 199,298 145,668
Cash and cash equivalents
at end of year 186,727 199,298
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2017
1. GENERAL INFORMATION
Northern Powergrid (Yorkshire) plc (the "Company") is a public
company limited by shares incorporated in England and Wales and is
part of the Northern Powergrid Holdings Company group of companies
(the "Northern Powergrid Group"). The address of the registered
office is Lloyds Court, 78 Grey Street, Newcastle-upon-Tyne, NE1
6AF.
The nature of the Company's business model, strategic
objectives, operations and activities are set out in the Strategic
Report.
2. ACCOUNTING POLICIES
Accounting convention and basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). These
financial statements have also been prepared in accordance with
IFRSs as adopted by the European Union and with those parts of the
Companies Act 2006 (the "Act") that are applicable to companies
reporting under IFRS.
The financial statements have been prepared under the historical
cost convention. Historical cost is generally based on the fair
value of the consideration given in exchange for goods and
services.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a
liability, the Company takes into account the characteristics of
the asset or liability if market participants would take those
characteristics into account when pricing the asset or liability at
the measurement date. Fair value for measurement and/or disclosure
purposes in these financial statements is determined on such a
basis, except for leasing transactions which are within the scope
of IAS 17, and measurements that have some similarities to fair
value but are not fair value, such as net realisable value in IAS 2
or value in use in IAS 36.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted)
in active markets for identical assets or liabilities
that the Company can access at the measurement
date;
- Level 2 inputs are inputs, other than quoted
prices included within Level 1, that are observable
for the asset or liability, either directly
or indirectly; and
- Level 3 inputs are unobservable inputs for the
asset or liability.
The principal accounting policies are set out below.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
2. ACCOUNTING POLICIES- continued
Application of new and revised IFRS
In the current year, the Company has a number of amendments to
IFRS issued by the International Accounting Standards Board
("IASB") that are mandatorily effective for an accounting period
that begins on or after 1 January 2017:
- Amendments to IAS The amendments to IAS 12 Income
12 Income Taxes Taxes clarify when a deferred
tax asset should be recognised
for unrealised losses. The
application of the amendments
has not resulted in any impact
on the financial performance
or financial position of the
Company.
- Amendments to IAS The amendments require an entity
7 Statement of Cashflows to provide disclosures that
enable users of financial statements
to evaluate changes in liabilities
arising from financing activities.
The directors of the Company
do not anticipate the application
of these amendments has not
had a material impact on the
Company's financial statements.
- Annual Improvements The Annual Improvements to
to IFRSs 2014-2016 IFRSs 2014-2016 Cycle include
Cycle a number of amendments to various
IFRSs. The application of these
amendments has had no effect
on the Company's financial
statements.
New and revised standards in issue but not yet effective
The Company has not applied the following new and revised IFRSs
that have been issued but are not yet effective for the year ended
31 December 2017:
- IFRS 9 - Financial A revised version of IFRS 9,
Instruments (1 January Financial Instruments, was
2018). issued in July 2014 mainly
to include: a) impairment requirements
for financial assets; and b)
limited amendments to the classification
and measurement requirements
by introducing a 'fair value
through other comprehensive
income' ("FVTOCI") measurement
category for certain simple
debt instruments. The directors
of the Company anticipate that
the application of IFRS 9 in
the future is unlikely to have
a material impact on amounts
reported in respect of the
Company's financial assets
and financial liabilities.
- IFRS 15 - Revenue In May 2014, IFRS 15, Revenue
from Contracts with from Contracts with Customers,
Customers (1 January was issued which establishes
2018). a single comprehensive model
for entities to use in accounting
for revenue arising from contracts
with customers. IFRS 15 will
supersede the current revenue
recognition guidance including
IAS 11 Construction Contracts,
IAS 18 Revenue and the related
Interpretations. The core principle
of IFRS 15 is that an entity
should recognise revenue to
depict the transfer of promised
goods or services to customers
in an amount that reflects
the consideration to which
the entity expects to be entitled
in exchange for those goods
or services. Under IFRS 15,
an entity recognises revenue
when (or as) a performance
obligation is satisfied. Far
more prescriptive guidance
has been added in IFRS 15 to
deal with specific scenarios.
Furthermore, extensive disclosures
are required by IFRS 15. On
the whole the directors anticipate
that the application of IFRS
15 will not have a material
impact on the Company's financial
statements; however there is
ongoing discussion in the industry
and amongst the accounting
professions to consider the
appropriate accounting treatment
for customer contributions
towards distribution system
assets. We continue to engage
in these conversations and
will evaluate and conclude
prior to the application of
the standard.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
2. ACCOUNTING POLICIES- continued
- IFRS 16 - Leases IFRS 16 introduces a comprehensive
(1 January 2019) model for the identification
of lease arrangements and accounting
treatments for both lessors
and lessees. IFRS 16 will supersede
the current lease guidance
including IAS 17 Leases and
the related interpretations
when it becomes effective.
IFRS 16 distinguishes between
leases and service contracts
on the basis of whether an
identified asset is controlled
by a customer. Distinctions
between operating leases and
finance leases are removed
for lessee accounting, and
is replaced by a model where
right-of-use asset and a corresponding
liability have to be recognised
for all leases by lessees except
for short term leases and leases
of low-value assets. As of
31 December 2016, the Company
has non-cancellable operating
lease commitments of GBP8.9
million, IAS 17 does not require
recognition of any right-of-use
asset or liability for future
payments for these leases.
A preliminary assessment indicates
that these arrangements will
meet the definition of a lease
under IFRS 16, and hence the
Company will recognise a right-of-use
asset and corresponding liability
in respect of all these leases
unless they qualify for low-value
or short-term leases upon the
application of IFRS 16.
- Amendments to IAS The amendments require an entity
7 (1 January 2017) to provide disclosures that
enable users of financial statements
to evaluate changes in liabilities
arising from financing activities.
The directors of the Company
do not anticipate the application
of these amendments will have
a material impact on the Company's
financial statements.
Critical judgements in applying accounting policies
The following are the critical judgements, apart from those
involving estimations, that the directors have made in the process
of applying the Group's accounting policies and that have the most
significant effect on amounts recognised in the consolidated
financial statements:
- The split of operating and capital expenditure
and the allocation of overheads to property,
plant and equipment:
Costs are capitalised where it is probable that
future economic benefits associated with the
asset will flow to the enterprise; and-the cost
of the item can be reliably measured.:
The allocation of overheads to capital is derived
from a detailed analysis of the costs and their
relevant cost drivers, which is reviewed on
annual basis.
The amount of overheads capitalised in the year
was GBP50.9m (2016: GBP47.4m)
Key sources of estimation uncertainty
In the preparation of financial statements in conformity with
IFRS the Directors did not identify any key assumptions concerning
the future and other key sources of estimation uncertainty at the
end of the reporting period that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
2. ACCOUNTING POLICIES- continued
Revenue
Revenue is only recognised when the risks and rewards of
ownership have been transferred to a third party. No revenue is
recognised where there are significant uncertainties regarding the
consideration to be received or the costs associated with the
transaction.
Revenue is measured at the fair value of consideration received
or receivable.
Revenue represents charges for the use of the Company's
distribution network, amortisation of customer contributions,
recharge of costs incurred on behalf of related parties and the
invoiced value of other goods sold and services provided, exclusive
of value added tax.
Revenues from charges to end customers for the use of the
Company's distribution network include estimates of the units
distributed. The estimated usage is based on historic data,
judgement and assumptions. Revenues are gradually adjusted to
reflect actual usage in the period during which actual meter
readings are obtained.
Any under or over-recovery of allowed distribution network
revenues as prescribed by Ofgem is not provided for in the
financial statements and will be recovered/repaid through future
tariffs.
Customer contributions towards distribution system assets are
included in deferred revenue. The Company's policy is to credit the
customer contribution to revenue on a straight-line basis, in line
with the useful life of the distribution system assets.
Interest income from a financial asset is recognised when it is
probable that the economic benefits will flow to the Company and
the amount of income can be measured reliably. Interest income is
accrued on a time basis, by reference to the principal outstanding
and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset's net carrying
amount on initial recognition.
Dividend income from investments is recognised when the
shareholders' rights to receive payment have been established.
Software development costs
Costs in respect of major developments are carried at cost less
accumulated amortisation and accumulated impairment losses.
Amortisation is recognised on a straight-line basis over the
estimated useful life of the software of up to 15 years. The
estimated useful life and amortisation method are reviewed at the
end of each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis.
Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use are added to the cost of those assets , until
such time as the assets are substantially ready for their intended
use.
All other borrowing costs are recognised in profit or loss in
the period which they are incurred.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
2. ACCOUNTING POLICIES - continued
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and accumulated impairment losses. Cost includes the
purchase price of the asset and any costs, including internal
employee and other costs, directly attributable to bringing the
asset to the location and condition necessary for it to be capable
of operating in the manner intended by management.
Depreciation is recognised so as to write off the cost of assets
less their residual values over their useful lives, using the
straight-line method:
Distribution system: 45 years
Distribution system assets
Distributed generation assets 15 years
Metering equipment included in distribution up to 5
system assets years
Information technology equipment included up to 10
in distribution system assets years
Non-operational assets:
Buildings - freehold up to 60 years
Buildings - leasehold lower of lease period
or 60 years
Fixtures and equipment up to 10 years
Software development costs up to 15
years
Freehold land is not depreciated.
The estimated useful lives, residual values and depreciation
method are reviewed at the end of each reporting period, with the
effect of any material changes in those estimates accounted for on
a prospective basis. Due to the significance of the Company's
investment in property, plant and equipment, variations in
estimates could impact operating results both positively and
negatively although, historically, few changes have been
required.
Assets in the course of construction are carried at cost, less
any recognised impairment loss. Costs include professional fees,
and, for qualifying assets, borrowing costs capitalised in
accordance with the Company's accounting policy. Such assets are
classified to the appropriate categories of property, plant and
equipment when completed and ready for intended use. Depreciation
on these assets, on the same basis as other assets, commences when
the assets are commissioned. Profit or loss on disposal is
recognised in other gains on the statement of profit or loss.
Internally-generated intangible assets
An internally generated intangible asset arising from
development is recognised if the conditions set out in IAS 38
relating to the recognition of intangible assets are met. The
amount initially recognised for internally-generated intangible
asset is the sum of expenditure incurred from the date when the
intangible asset first meets the recognition criteria. Amortisation
is recognised on a straight-line basis over their estimated useful
lives.
Impairment of tangible and intangible assets
At the balance sheet date, the Company reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated to determine the extent of the
impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the group estimates
the recoverable amount of the cash-generating unit to which the
asset belongs.
An intangible asset with an indefinite useful life is tested for
impairment at least annually and whenever there is an indication
that the asset may be impaired.
Where the recoverable amount is estimated to be less than its
carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
2. ACCOUNTING POLICIES - continued
Financial instruments
Financial assets and financial liabilities are recognised on the
statement of financial position when the Company becomes a party to
the contractual provisions of the instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities are added to or deducted from the fair value
of the financial assets or financial liabilities, as appropriate,
on initial recognition.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Net realisable value represents the estimated selling price
for inventories less all estimated costs of completion and costs
necessary to make the sale. Raw materials and goods for resale are
valued at purchase cost on an average price basis. Work in progress
is valued at the cost of direct materials and labour plus
attributable overheads based on the normal level of activity less
progress payments.
Taxation
The income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from 'profit before tax' as reported
in the statement of profit or loss because of items of income or
expense that are taxable or deductible in other years and items
that are never taxable or deductible. The Company's current tax is
calculated using tax rates that have been enacted or substantively
enacted by the end of the reporting period.
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the
current and deferred tax are also recognised in other comprehensive
income or directly in equity respectively.
Deferred tax is recognised on temporary differences between the
carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences. Deferred tax
assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits
will be available against which those deductible temporary
differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit. In addition, deferred tax liabilities are not
recognised if the temporary difference arises from the initial
recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at each
reporting period and reduced to the extent that that it is no
longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Research costs
Expenditure on research activities is written off to the
statement of profit or loss in the year in which it is incurred.
Other than software development, the Company does not carry out any
other development activity that would give rise to an intangible
asset.
Leases
Leases are classified as finance leases wherever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Operating lease rentals are recognised in the statement of
profit or loss or in property, plant and equipment on a
straight-line basis over the lease term.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
2. ACCOUNTING POLICIES - continued
Provisions
Provisions are recognised when the Company has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Company will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. When a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash
flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, a
receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
Pensions
The Company contributes to the Northern Powergrid Group of the
Electricity Supply Pension Scheme (the "DB Scheme"), a defined
benefit scheme. There is no contractual agreement or policy to
allow for accounting for the company's share of the defined benefit
scheme's liabilities and assets therefore the scheme has been
accounted for as a defined contribution scheme.
The company's share of the net defined benefit cost is allocated
between employers contribution and deficit payments. The
contribution is determined by the number of current employees in
the Company in the pension scheme. The deficit payments are agreed
by the Group with the Trustees, these deficit payments are
allocated by the group according to the liability relating to
previous and current employees on the scheme within Northern
Electric plc, Northern Powergrid (Yorkshire) plc, and Northern
Powergrid (Northeast) Ltd. The estimated amount of contributions
expected to be paid to the pension scheme by the company during the
next financial year is GBP18.5m (2016: GBP15.7m).
The Group also participates in a defined contribution scheme.
Contributions payable to the defined contribution scheme are
charged to the statement of profit or loss in the year or
capitalised as appropriate when employees have rendered service
entitling them to the contributions.
A liability is recognised for benefits accruing to employees in
respect of wages and salaries, annual leave and sick leave in the
period in which the related service is rendered at the undiscounted
amount of the benefits expected to be paid in exchange for that
service. Liabilities recognised in respect of short-term employee
benefits are measured at the undiscounted amount of the benefits
expected to be paid in exchange for the related service.
Liabilities recognised in respect of other long-term employee
benefits are measured at the present value of the estimated future
cash outflows expected to be made by the Company in respect of
services provided by employees up to the reporting date.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
2. ACCOUNTING POLICIES - continued
Financial assets
Financial assets, including trade and other receivables and cash
and cash equivalents, are classified as loans and receivables.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. Loans and receivables are measured at amortised cost using
the effective interest method, less any impairment.
The effective interest method is a method of calculating the
amortised cost of an instrument and of allocating income over the
relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts through the
expected life of the instrument to the net carrying amount on
initial recognition.
Interest income is recognised by applying the effective interest
rate, except for short-term receivables when the effect of
discounting is immaterial.
Cash and cash equivalents (which are presented as a single class
of assets on the face of the statement of financial position)
comprise cash at bank and other short-term highly liquid
investments with a maturity of three months or less, which are
subject to an insignificant risk of changes in value.
Financial assets are assessed for indicators of impairment at
the end of each reporting period. Financial assets are considered
to be impaired where there is objective evidence that, as a result
of one or more events that occurred after the initial recognition
of the financial asset, the estimated future cash flows of the
investment have been affected.
For certain categories of financial assets, such as trade
receivables, assets are assessed for impairment on a collective
basis even if they were assessed not to be impaired individually.
Objective evidence of impairment for a portfolio of receivables
could include the Company's past experience of collecting payments,
an increase in the number of delayed payments in the portfolio past
the average credit period of 30 days, as well as observable changes
in national or local economic conditions that correlate with
default on receivables.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account. When a trade
receivable is considered uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognised in the
statement of profit or loss.
Going concern
The directors have, at the time of approving the financial
statements, a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis
in preparing the financial statements. Further detail is contained
within the Going Concern Statement in the Report of the
Directors.
Capital management
The Group manages its capital centrally to ensure that entities
in the Group will be able to continue as going concerns while
maximising the return to stakeholders through the optimisation of
the debt and equity balance. The Group's overall strategy remains
unchanged from 2016.
The capital structure of the Company consists of net debt
(borrowings as detailed in note 18 offset by cash and cash
equivalents (detailed in note 15) and equity of the Company
(comprising issued capital, reserves and retained earnings as
detailed in notes 16 and 17).
The Company is subject to externally imposed capital
requirements as detailed in note 18. Further details on the
financial risk management is available on page 11 of the strategic
report.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
3. SEGMENTAL REPORTING
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Company that are
regularly reviewed by the President and Chief Executive Officer of
the Northern Powergrid Group in order to allocate resources to
these segments and to assess their performance.
In practice, the President and Chief Executive Officer allocates
resources and assesses performance based upon the aggregate results
of the Company and Northern Powergrid (Northeast) Limited, another
distribution network operator in the Northern Powergrid Group,
suggesting that no segmental reporting is required.
Revenue, profit before tax and net assets are attributable to
electricity distribution. Revenue is all in respect of sales to
United Kingdom customers.
Revenue represents charges made to customers for use of the
distribution system, the recharge of costs incurred on behalf of
related parties, amortisation of customer contributions and other
services and is included net of value added tax.
4. EMPLOYEES AND DIRECTORS
2017 2016
GBP'000 GBP'000
Salaries 57,407 58,487
Social security costs 6,513 6,501
Defined benefit pension costs 15,679 15,009
Defined contribution pension
costs 2,702 2,351
82,301 82,348
Less charged to property, plant
and equipment (49,179) (50,318)
33,122 32,030
A large proportion of the Company's employees are members of the
DB Scheme, most of the remaining employees are members of the
Northern Powergrid Pension Scheme, details of both are given in the
employee benefits note (note 22).
The average monthly number of employees during the year was:
2017 2016
No. No.
Technical 382 377
Industrial 581 589
Administration 90 98
Other 115 123
1,168 1,187
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
4. EMPLOYEES AND DIRECTORS - continued
DIRECTORS' REMUNERATION
2017 2016
GBP'000 GBP'000
Highest Paid:
Short-term employee benefits 375 319
Post-employment benefits - 10
Other long-term benefits 435 370
810 699
2017 2016
GBP'000 GBP'000
Total:
Short-term employee benefits 805 677
Post-employment benefits 40 52
Other long-term benefits 682 612
1,527 1,331
Directors who are a member of the
defined contribution scheme 23
Directors who are a member of the
defined benefit scheme 11
OTHER KEY PERSONNEL REMUNERATION
2017 2016
GBP'000 GBP'000
Total:
Short-term employee benefits 439 424
Post-employment benefits 97 81
Other long-term benefits 233 250
769 755
Other key personnel includes a number of senior functional
managers who, whilst not board directors, have authority and
responsibility for planning, directing and controlling the
activities of the Company.
The directors and key personnel are remunerated for their
services to the Northern Powergrid Group, of which the Company is a
subsidiary. The figures above represent the share of the costs
borne by the Company.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
5. NET FINANCE COSTS
2017 2016
GBP'000 GBP'000
Finance income:
Dividends received 54 43
Interest on tax refund - 537
Deposit account interest 4 2
Interest receivable on loans
to Group undertakings 563 534
621 1,116
Finance costs:
Bank interest (139) (105)
Interest payable on other loans (50,990) (50,073)
Borrowing costs capitalised 2,276 2,656
(48,853) (47,522)
Net finance costs (48,232) (46,406)
Borrowing costs were capitalised at a rate of 4.85% per annum
(2016: 5.71%) on eligible expenditure.
6. PROFIT BEFORE INCOME TAX
The profit before income tax is stated after charging:
2017 2016
GBP'000 GBP'000
Depreciation - owned assets 101,252 95,569
Research and development costs 1,731 1,562
Amortisation of deferred revenue (26,623) (24,864)
Impairment of trade and other receivables 659 841
Profit on disposal of plant, property
& equipment (388) (483)
Analysis of auditor's remuneration is as follows:
2017 2016
GBP'000 GBP'000
Fees payable to the Company's auditor
for the audit of the Company's annual
financial statements 121 130
Other assurance services 45 45
Total fees payable to the Company's
auditor 166 175
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
7. INCOME TAX
Analysis of tax expense
2017 2016
GBP'000 GBP'000
Current tax 25,847 11,836
Deferred tax 290 (6,520)
Total tax expense in statement of
profit or loss 26,137 5,316
Factors affecting the tax expense
The tax assessed for the year is lower (2016 - lower) than the
standard rate of corporation tax in the UK. The difference is
explained below:
2017 2016
GBP'000 GBP'000
Profit before income tax 139,745 153,445
Profit multiplied by the standard
rate of corporation tax in the 26,901 30,689
UK of 19.25% (2016 - 20.00%)
Effects of:
Changes in legislation (475) (7,329)
Current tax over provision for
prior years (493) (18,276)
Tax free income and disallowable
costs (100) (70)
Profits at deferred tax rate (63)
Deferred tax under provision for
prior years 297 380
Other 70 (78)
Tax expense 26,137 5,316
2017 2016
GBP'000 GBP'000
Tax expense comprises:
Current tax expense:
Corporation tax charge for the year 26,340 30,112
Over provision for prior years (493) (18,276)
Total current tax charge 25,847 11,836
Deferred tax:
Deferred tax expenses relating to
the origination and reversal of
temporary differences 468 429
Deferred tax under provision for
prior years 297 380
Effect of changes in legislation (475) (7,329)
Total deferred tax charge/(credit) 290 (6,520)
Tax on profit before tax 26,137 5,316
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
7. INCOME TAX - continued
Finance Act No.2 2015 included provisions to reduce the
corporation tax to 19% with effect from 1 April 2017 and Finance
Act 2016 introduced a further reduction in the main rate of
corporation tax to 17% from 1 April 2020. Accordingly deferred tax
assets and liabilities have been calculated at the tax rates which
will be in force when the underlying temporary differences are
expected to reverse.
8. DIVIDS
2017 2016
GBP'000 GBP'000
Interim dividend at 10.3p per
share (2015: 9.9p) 29,800 28,700
9. OPERATING EXPENSES
2017 2016
GBP'000 GBP'000
Operating expenses comprise:
Distribution costs 147,225 142,139
Administrative expenses 61,954 56,820
209,179 198,959
10. INTANGIBLE ASSETS
Software
development
costs
GBP'000
COST
At 1 January 2017 and 31 December 2017 29,497
AMORTISATION
At 1 January 2017and 31 December 2017 29,497
NET BOOK VALUE
At 31 December 2017 -
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
10. INTANGIBLE ASSETS - continued
Software
development
costs
GBP'000
COST
At 1 January 2016 and 31 December 2016 29,497
AMORTISATION
At 1 January 2016 and 31 December 2016 29,497
NET BOOK VALUE
At 31 December 2016 -
11. PROPERTY, PLANT AND EQUIPMENT
Non
operational Fixtures
land & Distribution and
buildings system fittings Totals
GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 January 2017 4,505 3,882,000 34,496 3,921,001
Additions - 213,868 3,355 217,223
Disposals - (9,019) (631) (9,650)
At 31 December 2017 4,505 4,086,849 37,220 4,128,574
DEPRECIATION
At 1 January 2017 2,415 839,837 24,104 866,356
Charge for year 178 97,552 3,522 101,252
Eliminated on disposal - (9,019) (631) (9,650)
At 31 December 2017 2,593 928,370 26,995 957,958
NET BOOK VALUE
At 31 December 2017 1,912 3,158,479 10,225 3,170,616
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
11. PROPERTY, PLANT AND EQUIPMENT
Non
operational Fixtures
land & Distribution and
buildings system fittings Totals
GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 January 2016 4,505 3,665,873 30,701 3,701,079
Additions - 225,065 4,099 229,164
Disposals - (8,938) (304) (9,242)
At 31 December 2016 4,505 3,882,000 34,496 3,921,001
DEPRECIATION
At 1 January 2016 2,237 756,598 21,194 780,029
Charge for year 178 92,177 3,214 95,569
Eliminated on disposal - (8,938) (304) (9,242)
At 31 December 2016 2,415 839,837 24,104 866,356
NET BOOK VALUE
At 31 December 2016 2,090 3,042,163 10,392 3,054,645
Assets in the course of construction included above:
Distribution Fixtures
system and fittings Totals
GBP'000 GBP'000 GBP'000
At 1 January 2016 192,567 - 192,567
Additions 225,065 4,099 229,164
Available for use (228,863) (4,099) (232,962)
At 31 December 2016 188,768 - 188,768
Additions 213,868 3,355 217,223
Available for use (210,966) (3,355) (214,321)
At 31 December 2017 191,670 - 191,670
The Company has entered into contractual commitments in relation
to the future acquisition of property, plant and equipment of
GBP19.7m (2016: GBP20.0m).
The net book value of non-operating land and buildings
comprise:
2017 2016
GBP'000 GBP'000
Freehold 1,104 1,225
Long leasehold 707 739
Short leasehold 101 126
1,912 2,090
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
12. INVENTORIES
2017 2016
GBP'000 GBP'000
Work-in-progress 776 265
13. TRADE AND OTHER RECEIVABLES
2017 2016
GBP'000 GBP'000
Current:
Distribution use of system receivables 60,712 61,659
Amounts receivable from
sale of goods and services 7,827 3,398
Prepayments and accrued income 5,502 4,907
Amounts receivable provided
for in bad debts (1,177) (1,465)
72,864 68,499
The directors consider that the carrying amount of trade and
other receivables approximates their fair value calculated by
discounting the future cash flows at the market rate at the end of
the reporting period. The maximum exposure to risk to the Company
is the book value of these receivables less any provisions for
impairment.
Distribution use of system receivables
The customers served by the Company's distribution network are
supplied predominantly by a small number of electricity supply
businesses with RWE NPower plc accounting for approximately 21% of
distribution revenues in 2017 (2016: 23%) and British Gas plc
accounting for approximately 16% of distribution revenues in 2017
(2016: 17%). Ofgem has determined a framework which sets credit
limits for each supply business based on its credit rating or
payment history and requires them to provide credit cover if their
value at risk (measured as being equivalent to 45 days usage)
exceeds the credit limit. Acceptable credit typically is provided
in the form of a parent company guarantee, letter of credit or an
escrow account. Included within other payables are customer
deposits of GBP0.2 million as at 31 December 2017 (2016: GBP0.4
million).
Ofgem has indicated that, provided the Company has implemented
credit control, billing and collection processes in line with best
practice guidelines and can demonstrate compliance with the
guidelines or is able to satisfactorily explain departure from the
guidelines, any bad debt losses arising from supplier default will
be recovered through an increase in future allowed income. Losses
incurred to date have not been material. Included in the Company's
use of system ("UoS") receivables are debtors with a carrying value
of GBP0.3 million, which have been placed into administration and
have therefore been provided in full at the year-end (2016: GBP0.3
million).
Amounts receivable from sale of goods and services
Sales of goods and services comprise all income streams which
are not classified as UoS income. Examples of non-UoS income
streams would be customer contributions in relation to distribution
system assets and recovery of amounts for damage caused by third
parties to the distribution system.
The average credit period on sales of goods and services is 30
days (2016: 30 days). Interest is not generally charged on the
trade receivables paid after the due date. An allowance for
doubtful debts is made for debts past their due date based on
estimated irrecoverable amounts from the sale of goods and
services, determined by reference to past default experience.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
13. TRADE AND OTHER RECEIVABLES - continued
Included in the Company's amounts receivable for goods and
services balance are debtors with a carrying amount of GBP2.3
million (2016: GBP2.2 million) which are past due at the reporting
date and for which the Company has provided an irrecoverable amount
of GBP0.9 million (2016: GBP1.2 million) based on past experience.
The Company does not hold any collateral over these balances. The
average age of these receivables is 287 days (2016: 300 days).
Included in the Company's amounts receivable for goods and
services balance are debtors with a carrying amount of GBP0.4
million (2016: GBP0.3 million). These amounts are past due at the
reporting date and the Company has not provided for any amounts as
not being recoverable, because there has not been a significant
change in credit quality and the amounts are still considered
recoverable. The Company does not hold any collateral over these
balances. The average age of these receivables is 90 days (2016: 72
days).
Ageing of past due but not impaired receivables
2017 2016
GBP'000 GBP'000
30-60 days 180 189
60-120 days 84 59
120-210 days 110 45
Total 374 293
Movement in the allowance for doubtful debts
2017 2016
GBP'000 GBP'000
At 1 January 1,465 721
Amounts utilised/written off in
the year (947) (97)
Amounts recognised in statement
of profit or loss 659 841
At 31 December 1,177 1,465
In determining the recoverability of the trade and other
receivables, the Company considers any change in the credit quality
of the trade and other receivable from the date credit was
initially granted up to the reporting date. The concentration of
credit risk, other than in relation to UoS receivables, is limited
due to the customer base being large and unrelated. Accordingly,
the directors believe that there is no further credit provision
required in excess of the allowance for doubtful debts.
Included in the allowance for doubtful debts are specific trade
receivables, with a balance of GBP0.6 million (2016: GBP1.0
million) which have been placed in administration. The impairment
represents the difference between the carrying amount of the
specific trade receivable and the present value of the expected
liquidation dividend.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
13. TRADE AND OTHER RECEIVABLES - continued
Categories of financial assets
2017 2016
GBP'000 GBP'000
Cash and bank balances 186,727 199,298
Loans and receivables at amortised
cost 67,642 63,747
Total financial assets 254,369 263,045
Non-current assets 3,170,616 3,054,645
Inventories 776 265
Prepayments and accrued income 5,222 4,752
Total non-financial assets 3,176,614 3,059,662
Total assets 3,430,983 3,322,707
14. CASH AND CASH EQUIVALENTS
2017 2016
GBP'000 GBP'000
Cash in hand 186,727 199,298
Cash and cash equivalents represent amounts owed by companies
within the Northern Powergrid Group (see related party disclosures
note), which have a maturity date of less than three months and
which are subject to an insignificant risk of changes in value. The
fair value of cash and cash equivalents is equal to their book
value.
15. CALLED UP SHARE CAPITAL
Allotted, authorised, issued and fully paid:
Number: Class: Nominal 2017 2016
value: GBP'000 GBP'000
290,000,000 Ordinary share capital GBP1 290,000 290,000
There is no right to fixed income.
16. RESERVES
Retained
earnings
GBP'000
At 1 January 2017 948,896
Profit for the
year 113,608
Dividends (29,800)
At 31 December 2017 1,032,704
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
16. RESERVES - continued
Retained
earnings
GBP'000
At 1 January 2016 829,467
Profit for the
year 148,129
Dividends (28,700)
At 31 December 2016 948,896
17. TRADE AND OTHER PAYABLES
2017 2016
GBP'000 GBP'000
Current:
Payments on account 50,208 40,354
Trade creditors 6,291 5,283
Amounts owed to Group undertakings 1,324 429
Social security and other taxes 6,655 8,959
Other creditors 4,723 5,968
Deferred revenue 27,941 26,743
Accrued expenses 27,051 27,493
124,193 115,229
Non-current:
Deferred revenue 780,039 762,475
Aggregate amounts 904,232 877,704
The directors consider that the carrying amount of other
financial liabilities approximates their fair value, calculated by
discounting future cash flows at market rate at the end of the
reporting period. The valuation of liabilities set out above is
based on Level 1 inputs. Trade creditors and accruals principally
comprise amounts outstanding for trade purchases and ongoing costs.
Invoices are paid at the end of the month following the date of the
invoice. The Company has financial risk management policies in
place to ensure that all payables are paid within the credit
timeframe.
The following tables detail the remaining contractual maturities
for the non-derivative financial liabilities. The tables have been
drawn up based on the discounted cash flows of financial
liabilities based on the earliest possible date on which the
Company can be required to pay. The tables include both interest
and principal cash flows. The standard payment terms for suppliers
is net monthly.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
17. TRADE AND OTHER PAYABLES - continued
Less than 3 months
3 months to 1 year 1 to 5+ years Total
5 years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2017:
Non-interest
bearing 46,044 - - - 46,044
Variable interest
rate liability 10 - - - 10
Fixed interest 18,500 31,173 512,692 909,901 1,472,266
rate liability
64,554 31,173 512,692 909,901 1,518,320
2016:
Non-interest
bearing 48,132 - - - 48,132
Variable interest
rate liability 12 - - - 12
Fixed interest
rate liability 18,500 31,173 380,192 1,092,074 1,521,939
66,644 31,173 380,192 1,092,074 1,570,083
Categories of financial liabilities
2017 2016
GBP'000 GBP'000
Loans and payables at amortised cost 1,069,133 1,067,824
Total financial liabilities 1,069,133 1,067,824
Payments received on account 50,208 40,354
Income tax liabilities 145,248 147,760
Other taxes and social security 6,655 8,959
Accruals 27,051 27,493
Deferred Revenue 807,980 789,218
Provisions 2,004 2,203
Total non financial liabilities 1,039,146 1,015,987
Total liabilities 2,108,279 2,083,811
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
17. TRADE AND OTHER PAYABLES - continued
Deferred Revenue
2017 2016
GBP'000 GBP'000
At 1 January 789,218 753,737
Additions 45,385 60,345
Amortisation (26,623) (24,864)
At 31 December 807,980 789,218
Deferred revenue represents contributions from customers made in
advance towards distribution system assets. This income is released
to the statement of profit or loss over 45 years or 15 years on a
straight line basis, in line with the useful economic life of the
distribution system assets.
18. BORROWINGS
The directors' consideration of liquidity, interest rate and
foreign currency risk are described in the Strategic Report.
Book Value Fair Value
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
Loans 1,056,795 1,056,144 1,239,727 1,260,799
1,056,795 1,056,144 1,239,727 1,260,799
The borrowings are repayable as follows:
On demand or within
one year 33,346 33,340 33,339 33,340
Between one and five
years 350,616 199,549 404,717 248,750
After five years 672,833 823,255 801,671 878,709
1,056,795 1,056,144 1,239,727 1,260,799
Analysis of borrowings:
Short-term loan 10 12 10 12
2020 - 9.25% bonds 217,377 217,227 250,130 266,428
2035 - 5.125% bonds 204,037 203,933 276,655 276,674
2032 - 4.375% bonds 150,654 150,528 187,384 187,202
2022 - European Investment
Bank 4.133% 153,711 153,692 175,056 179,923
2025 - 2.5% bonds 150,781 150,527 159,661 160,420
2022 - European Investment
Bank 2.564% 130,139 130,139 140,055 139,487
2022 - European Investment
Bank 2.073% 50,086 50,086 50,776 50,653
1,056,795 1,056,144 1,239,727 1,260,799
Average weighted interest rate: 4.62% (2016: 4.50%).
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
18. BORROWINGS - continued
The fair value of the bonds is determined with reference to
quoted market prices. The directors' estimates of the fair value of
bank loans and internal borrowings are determined in accordance
with generally accepted pricing models based on discounted cash
flow analysis using prices from observable current market
transactions or dealer quotes for similar instruments. The fair
value of short-term borrowings is equal to their book value. All
loans are non-secured and are denominated in sterling.
The valuation of liabilities set out above is based on Level 1
inputs.
Interest on short-term loans and inter-company short term loans
is charged at a floating rate of LIBOR plus 0.35%, thus exposing
the Company to cash flow interest rate risk. A 1% movement in
interest rates would not subject the Company to any change in
interest costs during the year. All other loans are at fixed
interest rates and expose the Company to fair value interest rate
risk.
The covenants associated with the 2035 bonds issued by the
Company include restrictions on the issuance of new indebtedness
and the making of distributions dependent on the scale of the ratio
of Senior Total Net Debt to Regulatory Asset Value ("RAV").
The definition of Senior Total Net Debt excludes any
subordinated debt and any debt incurred on a non-recourse basis. In
addition, it excludes interest payable, any fair value adjustments
and unamortised issue costs.
The Company's Senior Total Net Debt as at 31 December 2017
totalled GBP844.3m. Using the RAV value as at March 2018, as
outlined by Ofgem in its electricity distribution price control
financial model published in November 2017 and adjusting for the
effects of movements in the value of the Retail Price Index gives
an approximation for the RAV value as at March 2018 of GBP1,780.2m.
The Senior Total Net Debt to RAV ratio for the Company is therefore
estimated at 47.4% (2016 48.9%).
At 31 December 2017, the Company had available GBP94.0m (2016:
GBP94.0m) of undrawn committed borrowing facilities in respect of
which all conditions precedent had been met.
19. LEASING AGREEMENTS
Minimum lease payments under non-cancellable operating leases
fall due as follows:
2017 2016
GBP'000 GBP'000
Within one year 2,664 2,343
Between one and five years 5,820 4,866
In more than five years 442 1,430
8,926 8,639
2017 2016
GBP'000 GBP'000
Minimum lease payments under operating
leases recognised in the year 4,954 4,587
Leases primarily relate to the hire of fleet vehicles with lease
terms between 2 and 7 years. The Company does not have the option
to purchase the vehicles at the end of the lease term.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
20. PROVISIONS
2017 2016
GBP'000 GBP'000
Provisions 2,004 2,203
Analysed as follows:
Current 836 1,033
Non-current 1,168 1,170
2,004 2,203
Claims Other Total
GBP'000 GBP'000 GBP'000
At 1 January 2017 699 1,504 2,203
Utilised/paid in the year (1,103) (553) (1,656)
Charged to statement of profit
or loss 851 607 1,458
At 31 December 2017 447 1,558 2,005
Claims: Provision has been made to cover costs arising from
damages, public liability, and third party motor claims, which are
not externally insured. Settlement is expected substantially within
12 months.
Other: Primarily consists of a provision for future safe
disposal of transformers which contain oil contaminated with
Polychlorinated Biphenyls (PCBs) and for an amount to cover claims
made under section 74 of the New Road and Street Works Act 1991.
Costs are expected to be incurred over the next 20 years.
21. DEFERRED TAX
Accelerated
Tax Depreciation Other Total
GBP'000 GBP'000 GBP'000
At 1 January 2017 127,770 (97) 127,673
Charge/(credit) to statement
of profit or loss 407 (117) 290
At 31 December 2017 128,177 (214) 127,963
Accelerated
Tax Depreciation Other Total
GBP'000 GBP'000 GBP'000
At 1 January 2016 134,423 (230) 134,193
(Credit)/charge to statement
of profit or loss (6,653) 133 (6,520)
At 31 December 2016 127,770 (97) 127,673
Other comprises provisions and employee expenses deductible for
tax on a paid basis and claims for hold over relief.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
22. EMPLOYEE BENEFIT OBLIGATIONS
Introduction
The Company contributes to two pension schemes, which it
operates on behalf of the participating companies within the
Northern Powergrid Group. Those pension schemes are:
- The Northern Powergrid Group of the ESPS (the
"DB Scheme"); and
- The Northern Powergrid Pension Scheme.
The Northern Powergrid Pension Scheme was introduced for new
employees of the Northern Powergrid Group from July 1997 and is a
money purchase arrangement accounted for as a defined contribution
scheme. The disclosures in this note relate to the Group pension
scheme.
The DB Scheme is a defined benefit scheme for directors and
employees, which provides pension and other related retirement
benefits based on final pensionable pay. The DB Scheme closed to
staff commencing employment with the Northern Powergrid Group on or
after 23 July 1997. Members who joined before this date, including
some Protected Persons under The Electricity (Protected Persons)
(England and Wales) Pension Regulations 1990, continue to build up
future pension benefits.
Under the DB Scheme, employees are typically entitled to annual
pensions on retirement at age 63 of one-eightieth of final
pensionable salary for each year of service plus an additional
tax-free cash lump sum at retirement of three times pension.
Benefits are also payable on death and following other events such
as withdrawing from active service.
No other post-retirement benefits are provided to members of the
DB Scheme.
Role of Trustees
The DB Scheme is administered by a board of Trustees which is
legally separate from the Company. The assets of the DB Scheme are
held in a separate trustee-administered fund. The board of Trustees
is made up of Trustees appointed by the Company, as the Principal
Employer of the DB Scheme, Trustees elected by the membership and
an independent trustee. The Trustees are required by law to act in
the interests of all relevant beneficiaries and are responsible in
particular for the asset investment strategy plus the day-to-day
administration of the benefits payable. They also are responsible
for jointly agreeing with the Principal Employer the level of
contributions due to the DB Scheme.
Funding requirements
UK legislation requires that pension schemes are funded
prudently (i.e. to a level in excess of the current expected cost
of providing benefits). The last actuarial valuation of the DB
Scheme was carried out by the Trustee's actuarial advisors, Aon
Hewitt, as at 31 March 2016. Such valuations are required by law to
take place at intervals of no more than three years. Following each
valuation, the Trustees and the Northern Powergrid Group must agree
the contributions required (if any) to ensure the DB Scheme is
fully funded over time on the basis of suitably prudent
assumptions. Contributions agreed in this manner constitute a
minimum funding requirement. The next funding valuation is due no
later than 31 March 2019, at which progress towards full-funding
will be reviewed.
Agreement was reached during August 2017 with the Trustees to
repair the funding deficit of GBP194.9m as at 31 March 2016 over
the 9 year period to 31 March 2025, subject to the actuarial
assumptions adopted for the triennial valuation as at 31 March 2016
being borne out in practice. The agreement includes payments of
GBP2.3m per month to be made over the remaining 8 years and 3
months of the recovery plan. This amount is in 2017/18 prices and
will be updated on 1 April 2018 and on each 1 April thereafter in
line with changes in RPI.
The contributions payable by the Northern Powergrid Group to the
DB Scheme in respect of future benefits which are accruing
increased from 34.2% to 43.6% of pensionable pay from 1 April 2017.
These contributions were determined as part of the 31 March 2016
actuarial valuation and are payable in addition to the deficit
repair contributions mentioned above. These rates will remain in
place until such a time as a new schedule of contributions is
agreed between the Trustees and the Company as part of the 31 March
2019 valuation. In addition, the Company pays contributions to
cover the expenses of running the DB Scheme which increased from
3.0% to 3.6% of pensionable pay from 1 September 2017.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
22. EMPLOYEE BENEFIT OBLIGATIONS - continued
In addition, the Company pays contributions to cover the
expenses of running the DB Scheme which increased from 3.0% to 3.6%
of pensionable pay from 1 September 2017.
The Northern Powergrid Group's total contributions to the DB
Scheme for the next financial year are expected to be GBP45.4M.
Under the rules of the DB Scheme, any future surplus in the DB
Scheme may, following consultation with the Group Trustees, be
allocated for the benefit of the members of the DB Scheme and/or
the Principal and Participating Employers.
Pensions' Regulation
The UK pensions market is regulated by the Pensions Regulator
whose key statutory objectives in relation to UK defined benefit
plans are to:
- protect the benefits of members;
- promote and to improve understanding of good
administration;
- reduce the risk of situations arising which
may lead to compensation being payable from
the Pension Protection Fund ("PPF"); and
- minimise any adverse impact on the sustainable
growth of an employer.
The Pensions Regulator has various powers including the power
to:
- wind up a scheme where winding up is necessary
to protect members' interests;
- appoint or remove a trustee;
- impose a schedule of company contributions or
the calculation of the technical provisions
where trustees and company fail to agree on
appropriate contributions; and
- impose contributions where there has been a
detrimental action against the scheme.
Profile of the DB Scheme
The defined benefit obligation ("DBO") includes benefits for
current employees, former employees and current pensioners. The
overall duration of the DB Scheme's obligation was assessed to be
about 19 years based on the results of the 31 March 2016 funding
valuation. This is the weighted-average time over which benefit
payments are expected to be made.
Broadly, about 40% of the liabilities are attributable to
current employees (duration about 24 years), 10% to former
employees (duration about 25 years) and 50% to current pensioners
(duration about 14 years).
Risks associated with the DB Scheme
The DB Scheme exposes the Northern Powergrid Group to a number
of risks, the most significant of which are:
Risk Description Mitigation
Volatile The DBO is calculated The allocation to return-seeking
asset using a discount rate assets is monitored
returns set with reference to ensure it remains
to corporate bond yields. appropriate given the
If assets underperform DB Scheme's long-term
this discount rate, objectives. The Trustees
this will create an regularly review the
element of deficit. strategy from return-seeking
The DB Scheme aims assets and have diversified
to hold a significant some return-seeking
proportion (44%) of assets from equities
its assets in return-seeking into Reinsurance and
assets (such as equities) Listed Infrastructure
which, although expected to reduce overall risk.
to outperform corporate To avoid concentration
bonds in the long-term, risk, the allocation
create volatility and to UK equity is restricted
risk in the short-term. to 35% of the total
equity allocation.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
22. EMPLOYEE BENEFIT OBLIGATIONS - continued
Risk Description Mitigation
Changes A decrease in corporate The DB Scheme also
in bond bond yields will increase holds a substantial
yields the value placed on proportion of its assets
the DBO for accounting (61%) as bonds, which
purposes, although provide a hedge against
this will be partially falling bond yields
offset by an increase (falling yields which
in the value of the increase the DBO will
DB Scheme's bond holdings. also increase the value
of the bond assets).
There are some differences
in the credit quality
of bonds held by the
DB Scheme and the bonds
analysed to decide
the DBO discount rate,
such that there remains
some risk should yields
on different quality
bond/swap assets diverge.
Inflation A significant proportion The DB Scheme invests
risk of the DBO is indexed around 35% in LDI which
in line with price provides a hedge against
inflation (specifically higher than expected
in line with RPI) and inflation increases
higher inflation will on the DBO (rising
lead to higher liabilities inflation will increase
both the DBO and the
value of the LDI portfolio).
Currency To increase diversification, The DB Scheme hedges
risk the DB Scheme invests a proportion of the
in overseas assets. overseas investments
This leads to a risk currency risk for those
that foreign currency overseas currencies
movements negatively that can be hedged
impact the value of efficiently. The DB
assets in Sterling Scheme's currency hedging
terms. ratio is currently
50% in respect of overseas
developed market currencies.
Life The majority of the The DB Scheme regularly
expectancy DB Scheme's obligations reviews actual experience
are to provide benefits of its membership against
for the pensionable the actuarial assumptions
lifetime of the member, underlying the future
so increases in life benefit projections
expectancy will result and carries out detailed
in an increase in the analysis when setting
liabilities. an appropriate scheme
specific mortality
assumption.
The Company and Trustees have agreed a long-term strategy for
reducing investment risk as and when appropriate, this includes the
use of Liability Driven Investment (LDI) from October 2016 to more
closely match the nature and duration of the DB Scheme's
liabilities through the use of derivatives such as swaps and
repurchase agreements. The portfolio is designed to hedge a
proportion of the interest rate and inflation risk inherent in the
Scheme's liabilities. The target hedging level is currently 75%
(2016: 60%) of the DB Scheme's liabilities as measured on the basis
used for the funding valuation.
The Trustees insure certain benefits payable on death before
retirement.
Other risks
There are a number of other risks associated with the DB Scheme
including operational risks (such as paying out the wrong
benefits), legislative risks (such as the government increasing the
burden on pension schemes through new legislation) and other
demographic risks (such as a higher proportion of members dying
than assumed with a dependant eligible to receive a survivor's
pension from the DB Scheme).
A particular legislative risk exists in relation to the
equalisation of Guaranteed Minimum Pension ("GMP"), a quasi-state
benefit accrued by many UK plans over the period 1978 to 1997 as a
result of a UK government programme allowing pension plans to
"contract out" of the State Second Pension. The UK Government has
announced its intention to ensure that these benefits, which
currently pay out at different levels for men and women, are
gender-equalised in accordance with sex-discrimination legislation.
This would increase the DBO but it is not possible to fully
quantify the impact of this change at this stage. However it could
lead to an increase in the order of 2% to the DBO for a typical
scheme.
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
22. EMPLOYEE BENEFIT OBLIGATIONS - continued
Reporting at 31 December 2017
For the purposes of this disclosure, the current and future
pension costs of the Northern Powergrid Group have been assessed by
Aon Hewitt, a qualified independent actuary, using the assumptions
set out below, which the actuary has confirmed represent a
reasonable best estimate of those costs. The review has been based
on the same membership and other data as at 31 March 2016. The
board of Northern Powergrid Holdings Company has accepted the
advice of the actuary and formally approved the use of these
assumptions for the purpose of calculating the pension cost of the
Northern Powergrid Group.
The results of the latest funding valuation at 31 March 2016
have been adjusted to31 December 2017. Those adjustments take
account of experience over the period since 31 March 2016, changes
in market conditions, and differences in the financial and
demographic assumptions. The present value of the DBO and the
related current service cost were measured using the Projected Unit
Credit Method.
For schemes closed to new members, such as the DB Scheme, the
current service cost calculated under the Projected Unit Credit
Method is expected to increase as the members of the DB Scheme
approach retirement.
The principal assumptions used to calculate the liabilities
under IAS 19 are set out below:
Main financial assumptions 2017 2016
% p.a. % p.a.
RPI 2.95 3.00
Rate of long-term increase in
salaries 3.45 3.00
Pension increases 2.85 2.90
Discount rate for scheme liabilities 2.60 2.70
The financial assumptions reflect the nature and term of the DB
Scheme's liabilities.
Main demographic assumptions 2017 2016
Life expectancy for a male currently
aged 60 26.7 27.1
Life expectancy for a female
currently aged 60 28.8 28.8
Life expectancy at 60 for a male
currently aged 45 28.1 28.6
Life expectancy at 60 for a female
currently aged 45 29.9 30.6
Proportion of pension exchanged
for additional cash at retirement 10% 10%
The mortality assumptions are based on recent actual mortality
experience of DB Scheme members and allow for expected future
improvements in mortality rates.
The DB Scheme's funds are invested in the following assets:
Asset allocation 2017 2016
GBPm GBPm
Developed market equity 187.9 338.6
Emerging market equity 17.4 12.9
Property 164.7 91.4
Reinsurance 83.0 71.3
Listed infrastructure 112.7 99.2
Investment grade corporate bonds 423.5 366.9
Other debt 43.4 30.3
Fixed interest gilts 28.2 52.4
Index-linked gilts - 3.1
Liability driven investments 644.2 581.2
Cash 51.0 107.1
Total 1,756.0 1,754.4
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
22. EMPLOYEE BENEFIT OBLIGATIONS - continued
The fair values of the above equity and debt instruments are
determined based on quoted market prices in active markets whereas
the fair values of properties are not based on quoted prices in
active markets.
As at 31 December 2017, the fair value of the DB Scheme's
assets, which related to self-investment, amounted to GBPnil (2016:
less than GBPnil).
Changes to the present value 2017 2016
of the DBO during the year
GBPm GBPm
Opening DBO 1,722.9 1,453.2
Current service cost 17.9 14.9
Interest expense on defined benefit
obligation 45.1 53.0
Contributions by DB Scheme participants 0.9 1.0
Actuarial gains on DB Scheme
liabilities arising from changes
in demographic assumptions (33.3) -
Actuarial losses on DB Scheme
liabilities arising from changes
in financial assumptions 49.7 311.5
Actuarial gains on DB Scheme
liabilities arising from experience (19.8) (25.9)
Net benefits paid out (52.5) (84.8)
Liabilities extinguished on settlements (101.8) -
Closing DBO 1,629.1 1,722.9
Changes in the fair value of 2017 2016
DB Scheme assets during the year
GBPm GBPm
Opening fair value of DB Scheme
assets 1754.4 1,541.3
Interest income on DB Scheme
assets 46.9 56.7
Re-measurement gains on DB Scheme
assets 64.7 200.9
Contributions by the employer 45.0 40.5
Contributions by DB Scheme participants 0.9 1.0
Net benefits paid out (52.5) (84.8)
Administration costs incurred (1.3) (1.2)
Assets distributed on settlements (112.1) -
Closing fair value of DB Scheme
assets 1,746.0 1,754.4
Actual return on DB Scheme assets 2017 2016
GBPm GBPm
Interest income on DB Scheme
assets 46.9 56.7
Re-measurement gain/(loss) on
DB Scheme assets 64.7 200.9
Actual return on DB Scheme assets 111.6 257.6
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
22. EMPLOYEE BENEFIT OBLIGATIONS - continued
Sensitivity to key assumptions
The key assumptions used for IAS 19 are discount rate, inflation
and mortality. If different assumptions were used, it could have a
material effect on the results of the Group. The sensitivity of the
results to these assumptions is as follows.
Changes Revised
in DBO DBO
GBPm GBPm
Current Figures 1,629.1
Following a 10 bps decrease in
the discount rate 31.9 1,661.0
Following a 10 bps increase in
the discount rate (31.5) 1,597.6
Following a 10 bps increase in
the inflation assumption 27.0 1,656.1
Following a 10 bps decrease in
the inflation assumption (26.7) 1,602.4
Following a 1 year increase in
life expectancy 68.5 1,697.6
Following a 1 year decrease in
life expectancy (67.1) 1,562.0
The sensitivity information shown above has been prepared using
the same method as adopted when adjusting the results of the latest
funding valuation to the statement of financial position date. This
is the same approach as has been adopted in previous periods.
23. RELATED PARTY DISCLOSURES
The Company entered into transactions, in the ordinary course of
business, with affiliated companies. Transactions entered into and
trading balances outstanding at the year-end were as follows:
Amounts Borrowings
Sales Purchases owed Finance to/(from
to related from to related costs/ related
parties related parties (Income) parties)
parties to related
parties
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Related Party
2017
Integrated Utility
Services Limited 112 2,128 - - -
Integrated Utility
Services Limited
(registered 804
in Eire) - 304 - -
Northern Electric
plc 2 4,197 - - -
Northern Powergrid
Metering Limited 574 - - - -
Northern Powergrid
(Northeast) 12,620 19,061
Limited - -
Vehicle Lease
and Service 520
Limited 62 4,147 - -
Yorkshire Electricity
Group plc - - - (563) 186,727
13,370 29,837 1,324 (563) 186,727
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
23. RELATED PARTY DISCLOSURES - continued
Amounts Borrowings
Sales Purchases owed Finance to/(from
to related from to related costs/ related
parties related parties (Income) parties)
parties to related
parties
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2016
Integrated Utility
Services Limited 112 1,210 - - -
Integrated Utility
Services Limited
(registered
in Eire) - 236 14 - -
Northern Electric
plc - 4,915 - -
Northern Powergrid
Metering Limited 355 - - - -
Northern Powergrid
(Northeast) 10,841 17,348
Limited - 55 -
Vehicle Lease
and Service 415
Limited 62 4,017 - -
Yorkshire Electricity
Group plc - - - (589) 199,298
9,773 27,993 440 (534) 199,298
Sales and purchases from related parties were made at commercial
prices. Interest on loans from Northern Powergrid Group companies
is charged at a commercial rate. The amounts outstanding are
unsecured and will be settled in cash. No guarantees have been
given or received. No provisions have been made for doubtful debts
in respect of amounts owed by related parties.
There are no transactions with key management personnel apart
from remuneration that is disclosed in note 4.
24. RECONCILIATION OF PROFIT BEFORE INCOME TAX TO
CASH GENERATED FROM OPERATIONS
2017 2016
GBP'000 GBP'000
Profit before income tax 139,745 153,445
Depreciation charges 101,252 95,569
Profit on disposal of fixed assets (388) (483)
Amortisation of deferred revenue (26,623) (24,864)
Increase/(decrease) in provisions (199) 204
Finance costs 48,853 47,522
Finance income (621) (1,116)
262,019 270,277
(Increase)/decrease in inventories (511) 200
Increase in trade and other receivables (4,400) (2,777)
Decrease in trade and other payables (3,983) (890)
Cash generated from operations 253,125 266,810
NORTHERN POWERGRID (YORKSHIRE) PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
25. ULTIMATE CONTROLLING PARTY
The immediate parent undertaking of Northern Powergrid
(Yorkshire) plc is Yorkshire Electricity Group plc (Lloyds Court,
78 Grey Street, Newcastle upon Tyne, NE1 6AF). The ultimate
controlling party and ultimate parent undertaking Yorkshire
Electricity Group plc is Berkshire Hathaway, Inc., a company
incorporated in the United States of America.
Copies of the group financial statements of Berkshire Hathaway,
Inc. (3555 Farnam Street, Omaha, Nebraska 68131) (the parent
undertaking of the largest group preparing group financial
statements) which include Northern Powergrid (Yorkshire) plc and
the group financial statements of Northern Powergrid Holdings
Company, the smallest parent undertaking to prepare group financial
statements in the UK, can both be obtained from the Company
Secretary, Northern Powergrid Holdings Company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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April 26, 2018 09:06 ET (13:06 GMT)
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